Scott administration proposes caps on spending, commission that could close schools

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by Anne Galloway, VT Digger

As promised, Gov. Phil Scott has proposed significant changes to the state’s education funding system. Most of the proposals, in a memo submitted to lawmakers, focuses on caps for tax rates, per pupil spending rates and cuts to the state’s rebate program.

The estimated savings for the Scott administration’s proposed cost containment and education fund changes would be $75 million to $94 million.

Scott has also proposed the creation of a school consolidation commission that would evaluate whether schools with low student enrollments are viable. “Non-viable” schools would be consolidated by the commission.

The governor is fulfilling a campaign promise to lower state spending on K-12 spending which has increased from $1.34 billion in 2010 to $1.62 billion in 2017. Meanwhile, student population has continued to drop. Over the past 20 years, student enrollments have declined by 30,000 pupils.

The cost of funding the state’s schools is anticipated to increase by 7 percent in the coming year. Most of that hike is the result of a $50 million deficit in the K-12 education fund. Because Vermont has a statewide funding system, local districts have to make up the difference. School districts are expected to increase spending by about 3 percent on average, which would increase the gap between spending and current tax rates by another $30 million.

Scott has said he will not accept any increases in property taxes this year and reiterated that pledge in his weekly press conference on Friday.

The governor also emphasized that all options should remain on the table and he said he is willing to work with lawmakers to develop a plan that eliminates the statewide education fund deficit. Scott has also issued a memo to school boards urging districts to keep spending at current levels.

In a letter to the House Ways and Means Committee and the Senate Finance Committee, Susanne Young, the secretary of the Agency of Administration, urged lawmakers to consider the proposals with an open mind and “with a sense of urgency.”

The Scott administration attributes the problem of growing school spending against a backdrop of declining enrollments to a disconnect between increases in local budgets and tax bills. Seventy percent of Vermonters are eligible for income sensitivity rebates when property taxes exceed 2 percent of household income. That means many local residents are voting for budgets without having to pay significantly more in property taxes.

Young sees that as a problem. “The current formula does not adequately connect local budgets to local taxpayers in a way that would constrain statewide property tax growth,” she wrote.

Democratic lawmakers, who are the majority in the Legislature, have long lauded the income sensitivity program as a key mechanism for ensuring tax equity.

The Scott administration’s proposals were not presented as a fully vetted package. Kaj Samsom, the commissioner of the Vermont Department of Taxes, emphasized that the recommendations are ideas that the governor wants to put on the table for legislative consideration.

The laundry list of options could reduce tax rates in the short term and over the long haul, based on an initial review by the administration, Samsom said in testimony before the House Ways and Means Committee on Friday.

The tax writing committee skipped over cost containment proposals that chair Rep. Janet Ancel, D-Calais, should be taken up by the House Education Committee, and went straight to education funding reform recommendations.

The administration’s reform proposals include:

• Setting a cap for the per equalized pupil rate at $17,000. Average spending per pupil is currently $15,800. Thirty-three districts in the state are spending above $17,000 per equalized pupil at this time. Savings: $37 million
• Freezing the income sensitivity adjustment at the fiscal year 2018 level. Payments totaled $173 million in the current year. Savings: $3.4 million
• Requiring an asset test for homeowners under age 65 with “passive” income from investments exceeding $10,000 a year. Savings: $5 million to $7 million
• Changing the Current Use Program value to an 85 percent exemption.
• Refilling the education fund reserves to 5 percent. The Legislature retains a reserve of 3.5 percent to 5 percent from year to year. Savings: $1 million
• Removing exemptions from the excess spending threshold for districts that tuition out students. Savings: $3.2 million

Some of the proposed base budget changes from the Vermont Department of Finance and Management include:

• Freezing special education rates. The Scott administration says school districts have been over-budgeting for special education and services have been level-funded for the past three years. Savings: $1.5 million
• Increasing reimbursements for extraordinary individual education costs from $50,000 to $77,000 per student per year and tying the costs to inflation. The state would pay 60 percent of the amount above the threshold, instead of 90 percent. Savings: $1.5 million
• Memorializing in statute the recommended cost sharing for teacher health care. Savings: $3 million
• Achieving a student to staff ratio of 1 to 4.45 through attrition — retirements, vacancies and management of positions — across school districts in the current fiscal year. Savings $30 million

The administration also proposes long-term changes to education policy that could generate long-term savings.

Chief among these is the proposed formation of a school consolidation commission that would determine whether schools have enough students to remain viable. The commission would evaluate vacancy rates and consider better utilization of space within districts. In addition, the group would consider consolidation of schools in adjacent districts. Five-year attrition plans would be developed for supervisory unions to examine staffing levels.

In addition, the Scott administration recommends the adoption of a UVM study on special education spending that found the state spends between 150 percent to 200 percent more per student in special education programs. UVM researchers suggested that the state implement a block grant system for funding special education.

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