“Scribblings”: Education Cost Containment and Property Tax Relief 
By Rep. Thomas F. Koch, Barre Town

It was a piece of garbage masquerading as education cost containment and property tax relief.  But it was so lacking in vision and saved so little money that 75 votes could not be found on Thursday afternoon to pass H. 526, so it was postponed until next Tuesday.  Unless some major changes are made by Tuesday, its prospects then may prove no different, and it could get sent back to committee to hang on the wall.

The major objection, in my view, is not that what the bill did was wrong, but that it did so little. In Vermont, our current annual expenditure on K-12 education, including local, state, and federal funds, is $1.78 billion.  (That’s $1,780,000,000.)  This bill was estimated to save $9.5 million.  That’s not even a drop in the bucket.  It doesn’t respond to the anguish we heard last fall from taxpayers, and it certainly doesn’t keep the political promises that we made as candidates while campaigning for the legislature.

The bill did some good things.  It would have reduced the maximum property tax prebate from $10,000 to $6,000.  It would also require the state to pay 100 percent of special education costs for state-placed students.  And it would require that collective bargaining be conducted on the supervisory level, while preserving the right of individual districts to accept or reject the terms of a negotiated agreement.

The bill also dealt with the concept of excess spending by school districts.  Presently, if a school district spends more than 125% of the statewide average district spending per “equalized pupil,” the district is required to pay a penalty tax to the state of one dollar for every dollar of spending by the district in excess of that 125% threshold.  There is evidence that school boards work very hard to make sure they do not cross the threshold, and in that regard, the excess spending provision serves the purpose it was designed to serve—cost containment.  The trouble is that the threshold is so high—currently $11,728 per “equalized student”—that it permits a tremendous amount of spending before a district finds itself in the “penalty box.”  So H.526 proposed to lower the threshold from 125% to 123%.  Big deal.

On the subject of special education, the bill would establish a detailed procedure for the commissioner of education to review, consult with, and recommend cost-saving strategies for districts found to be spending more than necessary on special education.  For failure of a school district to make satisfactory progress in remediation, the department could withhold a portion of special education reimbursements due to that district. 

Beyond that, the bill would create a long list of committees, studies, and reports, namely:

• A report by the commissioner of education on the result of his statewide discussions on education governance and restructuring, with his recommendations.
• A report by the legislative joint fiscal office on cost drivers in education.
• A committee to study and report on the cost of state and federal mandates to local school districts.
• Annual reports thereafter by the commissioner of education on any mandates added since the last report.
• A report on how to maximize the use of Medicaid funds to pay for eligible costs otherwise paid for by the education fund.
• A report by the joint fiscal office identifying human services functions performed by public schools (i.e., how our schools have increasingly been forced to surrender their educational mission in favor of becoming social service delivery agencies.)
• A report by the department of education on a proposal to integrate financial management systems among all school districts.
• A report by the tax department’s division of property valuation and review on the feasibility of adopting a statewide system of rolling reappraisals on a three-year or five-year basis.
• A study by consultants hired ($50,000 please!) by the legislative council to conduct “a thorough and independent review and analysis of the use value appraisal program.”

Of course, most if not all of these subjects for study and report should have been on the legislature’s radar scope on a continuing basis, and most particularly during the last two years.  In fact, some of these studies have already been done in one form or another—it seems we just need to do them again before we can trust what they are telling us.

The problem with this bill is in its timidity.  I have previously expressed my view that the cap on prebates should be $4000 rather than $6000.  The lowering of the high spending threshold from 125% to 123% is tokenism at its best; the committee discussed but discarded a proposal to lower the threshold to 115%, which might have made a real difference in controlling costs.  But since the threshold is based on statewide average spending, and spending goes up every year, the threshold goes up every year; a better idea would be to set the threshold at a stated dollar amount per pupil, with a reasonable annual adjustment for normal inflation.  The payment of all special education costs by the state for state-placed students is the right thing to do, but it does not save money, only shifts the source of payment.

For those interested in true cost containment and property tax relief, the following suggestions should prove useful:

First, define a core curriculum, with standards for excellence, which every school is required to provide.

Second, determine the cost of providing that core curriculum, and assure that every school district can provide it, using a fully funded, fair, and adequate state aid formula, to supplement a local property tax system that voters can understand before they vote.

Third, in compliance with the Vermont Supreme Court’s decision in the  Brigham case, which requires equal educational opportunity for all students regardless of the wealth of the student’s district, provide for full public school choice, whereby any student in Vermont can attend any school of that student’s choice, with funding following the student.

Fourth, require that any school budget increase in excess of the rate of inflation (or a general estimate of the rate of inflation established by statute, such as 3.5%) be approved by a super-majority of the voters of a school district.

Fifth, maintain the rebate/prebate system limiting education property taxes to 2.0% (not 1.8%) of a taxpayer’s household income.

Sixth, send the prebate check to the taxpayer, not to the town clerk.

Seventh, provide for collective bargaining of contracts for school personnel by region—not by supervisory district as proposed by H. 526, and not by individual school districts as is the current practice.

Eighth, eliminate a school district’s right to impose a contract in the event of an impasse in collective bargaining, eliminate the right of school district employees to strike, and provide instead that any impasse will be submitted to mandatory, binding arbitration in which the arbitrator will choose from one or the other “last best offers” of the negotiating parties.

Ninth, provide incentives, whether by way of increased state aid or otherwise, to school districts to increase student/teacher ratios from the nation’s lowest (12:1) to the nation’s median (roughly 16:1).

Finally, in light of Education Commissioner Richard Cate’s statewide meetings, provide incentives—as opposed to mandates—for schools and school districts to consolidate in order to achieve economies of scale.

These suggestions will not meet with universal approval, but that is not surprising, nor is it reason to be discouraged.  What I heard most while campaigning last year was that people were overburdened by property taxes, and they want relief.  Relief, however, is an overall reduction of tax burden as a percentage of income—not an exchange of one tax burden for another.

After the failure of H.526, Speaker Symington was quick to fault Governor Douglas for a “lack of leadership.”  She expected him to deliver Republican votes for H.526, ignoring the fact that House Republicans have minds of our own.  Now she has threatened to deliver something to the Governor’s desk that he will not like at all.  (Think “income tax.”)  But we already have one of the highest income taxes in Vermont, and if you really want to ruin Vermont’s business climate, all you have to do is raise the income tax.  Jumping out of the pot and into the fire is no way to pursue tax relief!

We are faced with a basic problem.  Act 60/68 is a cash cow, generating millions of dollars more each year than we ever dreamed, allowing the legislature to reduce the tax rate every year while the actual tax revenues keep going up.  And as long as the revenue system continues to produce money, the educational system will continue to absorb it.  Act 60/68 is also a system that local voters have little control over, and it is a system that is so little understood that even the “experts” who attempt to explain it to others find themselves getting confused and making errors.  It is a system that needs to be replaced by one designed to raise money and pay bills to support a specific budget, after that has been adopted, a system that is understood by most taxpayers, and that can be controlled by casting one’s vote in an informed manner. 

Unfortunately, current legislative leadership is ideologically committed to funding education either by the tax system we know as Act 60/68, or by an increased income tax.  As long as that ideological commitment prevails, we will see neither tax relief nor cost containment.  Unless the legislature as a whole is willing to consider new solutions, lay aside ideologies and preconceptions, listen to the people, and consider bold solutions, nobody should expect a solution to the education tax problem.