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Vermont Seeks School-Funding System Reform

Property Tax Increases Loom While House Looks for Solution

Montpelier — In an uncharacteristic bid to exert heavier influence over the financial decisions of local school boards, House Democrats are undertaking a late-session push for controversial reforms to Vermont’s education funding system.

With statewide property tax rates on pace to jump more than 10 percent over the next two years, lawmakers are looking to flatten a spending trajectory that many here blame in part on the state’s school-funding system.

“There is an argument in this building by some legislators that one of the effects of Act 60 was to have upward pressure on spending, and that it’s too easy to spend more money because of the actions of this Legislature in creating our current tax scheme,” said Rep. David Sharpe, the ranking Democrat on the House Committee on Ways and Means.

Democrats have, by and large, rejected that argument in recent years — Gov. Peter Shumlin calls Act 60 the most “elegant” school-funding system in the nation.

But even long-time defenders of the financing scheme are beginning to question the role of Act 60 in rising property taxes. And while belief in “local control” continues to reign supreme over lawmakers’ deliberations, a slew of provisions voted out of the House’s tax committee last week would constitute some of the most aggressive moves yet by Montpelier to suppress the growth in school budgets.

“The question is: Do we believe that we have a responsibility in this building to look at school spending?” Sharpe said.

To the extent that Act 60 bears some responsibility for the spending problem, Sharpe said, then perhaps they do.

“We should not be encouraging increased spending with tax policy,” he said.

Sharpe spent most of last Friday pitching the plan to a host of wary constituencies, many of whom would suddenly be forced to contend with new financial constraints. The bill would phase out the small-schools grant, lower the threshold at which schools suffer excess-spending penalties, and increase out-of-pocket tax exposure for the two-thirds of property-tax payers who currently benefit from income sensitivity.

The bill also directs the secretary of the Agency of Education to analyze staff-to-student ratios in Vermont schools, and return next year with recommendations for how to reduce them — recommendations that could include financial penalties for schools that exceed certain limits.

Sharpe said the Legislature in recent years has enacted a number of policies to encourage small schools clustered in neighboring districts to merge administrative apparatuses, and consolidate low-enrollment schools. Meanwhile, he said, the Legislature is allocating about $7.5 million annually in “small-school grants” designed to offset operating costs unique to the tiny scales on which those institutions operate.

“On the one hand, we’re encouraging the creation of cooperative school districts. And on the other hand, we’re giving subsidies to schools that choose to remain separate,” he said. “Is it fair for property-tax payers in districts without small-school grants to be subsidizing small schools?” Sharpe, whose committee passed the bill by an 11-0 vote, said the legislation would phase the grants out starting in fiscal year 2016; three years later the grants would be eliminated altogether.

By far the most expedient way to drive down education costs, Sharpe said, is to lower the financial threshold at which schools are penalized for “excess” spending.

Under current law, per-pupil spending in a district can hit 125 percent of the statewide average before local taxpayers begin to suffer the penalty. The proposed legislation would ramp down the cut-off point to 121 percent over the next three years.

“This is the critical number for limiting spending in this state,” Sharpe said. “We know that school boards pay very close attention to it, and run up to the edge. The single thing we can do in this Legislature to reduce spending is to reduce that high spending threshold.” Those proposals, among others in the bill, have raised concerns of lobbyists who represent teachers, school boards and superintendents. Of particular concern, they say, are the provisions’ effect on small schools, many of which could suffer impacts disproportionate to their role in the education funding problem.

Steve Dale, executive director of the Vermont School Boards Association, said he’s particularly concerned by lawmakers’ desire to establish preferred staff-to-student ratios, and what the penalties might ultimately be for schools that exceed those standards.

“Because it does get into a level of micro-management of exactly how schools should be configured, and how teachers should be used,” Dale said. “We are fine with the development of the data; if it’s good, reliable data we ought to know what the ratios are. But it’s way too early to be asking the secretary for a detailed plan for minimum standards.”

Dale said no other single provision in the bill alone merits huge concern. But in concert, he said, many of the provisions could hurt small schools. For instance, the legislation would amend a statute that protects schools financially from a sudden drop in enrollment. Combined with the elimination of the small school grant, and the alterations in excess spending threshold, Dale said, lawmakers could be creating undue hardship.

“There are three or four items that would end up being unfavorable to small schools,” Dale said. “And the level of modeling that would be required to understand the collective impact of these provisions does not seem to have been adequately done.”