MONTPELIER -- Gov. Peter Shumlin reiterated at a news conference Wednesday that the statewide property tax is going up dramatically this year because school boards aren't doing enough to contain spending.
Lawmakers, school board members and the head of the Vermont School Boards Association say it's unfair to blame schools because most of the increase is not related to school spending. They say changes to the $1.5 billion Education Fund made by the Legislature and the Shumlin administration that have led to hikes in the statewide property tax.
Statewide property tax rates are set to increase 5 cents per $100 of assessed value in fiscal year 2014 and 7 cents in fiscal year 2015. The governor said in a letter to school boards last fall that school spending is projected to increase spending by 3.8 percent this year (a total spending increase of roughly $46.5 million), which he says is "not a sustainable rate of increase," and he urged school boards to cut spending. (Special education spending, which is split between towns and the state, will go up $10 million next year.)
Vermont, which has a population of 626,000 and more than 300 school districts, has one of the lowest student-to-teacher ratios (9.8 to 1 in 2012) and one of the highest per pupil spending rates in the nation. The state also has what is widely viewed as a quality education system. The state has one of the highest high school graduation rates nationwide and Vermont students consistently score well on national tests.
Lawmakers and the Shumlin administration held a conference last week to discuss options for reforms to the education system that would help schools pool resources and better control administrative costs. There was also talk of reforming Vermont's funding formula, which has been in place since 1997 and is the first in the nation to equalize spending from town to town through a statewide property tax.
Even though there is a recognition by the education community and politicians that reforms must be made sooner rather than later, lawmakers are ambivalent about making significant changes this session (in part, they admit, because it is an election year).
Meanwhile, the governor blames the statewide tax increases on school spending this year. In his budget address, Shumlin said the tax hike was due to increased school spending, and he exhorted school boards to scrutinize budgets.
"I am not at all happy that Vermonters will once again bear an increase of 5 to 7 cents in the statewide property tax rate next year based upon projections for local school spending," the governor said. "I urge Vermonters at town meetings across our state this year to carefully scrutinize school budgets that increase per pupil spending and grow faster than our incomes. Look hard to see if you can achieve savings for better outcomes at a lower cost. Remember, you have the power to determine your school budgets, but you can't make a difference if you don't participate."
The governor ratcheted up the rhetoric at his weekly news conference Wednesday when a reporter asked why he was asking school boards to reduce spending when his own recommendation for the state budget is going up 5 percent. The state's human services expenditures are up by 6 percent.
"If I had a 20 percent reduction in my caseload at the Agency of Human Services, I could lay people off and reduce my budgets, but I don't," Shumlin told reporters. "I'm working in an environment where my caseload is increasing, where the federal government is cutting back on programs that keep Vermonters from freezing in the winter time, cutting back on programs for 100,000 Vermonters that are food insecure, that can't put food on the table for their families, and Vermonters are making a judgment that while we know we can't fill the holes and the foolishness of the federal government, we can make sure we make small investments to make sure no one freezes in their home or freezes in the streets.
"What school boards are looking at is a caseload that has dropped 20 percent -- 20 percent -- fewer students, more staff and rising property taxes," Shumlin said.
"It's not a secret to anybody that we've got more administrators, more bureaucracy and among the highest per pupil spending in America, so the answer now is not more money, the answer is when there is a 20 percent reduction in the student count, how can we find efficiencies so property taxpayers don't get kicked in the teeth," the governor said.
Educators and lawmakers say Shumlin's jabs at local schools incite outrage among the state's 1,450 volunteer school board members and ultimately does more harm than good.
Rep. Johanna Donovan, D-Burlington, and chair of the House Education Committee, says the governor has been right on target about the power of education to transform the lives of Vermonters and she was surprised and disappointed by his 20 percent remark.
"I don't know where Gov. Shumlin found Gov. Douglas' scripts, but he's using them well," Donovan said.
Rep. Adam Greshin, I-Warren, says the governor "refuses to acknowledge the state's role in fueling statewide spending."
"Our funding mechanism substantially separates local decision-making from the tax consequences of those decisions," Greshin said. "It's no surprise school boards are frustrated and voters are angry. No one can understand our education finance system and everyone suspects mischief. Rather than lecturing school boards to hold the line, the governor should acknowledge the state's role in the problem and invite school boards to be part of the solution."
Steve Dale, the executive director of the Vermont School Boards Association, says student enrollment has declined 20 percent over a 15-year period -- not 20 percent in one year, as the governor implies. The pupil count dropped 1 percent this year, Dale said.
"This whole part of the conversation was misleading and it seemed oriented toward focusing all the attention on school district spending and away from any state participation in searching for a resolution for the immediate pressure on property taxes," Dale said. "We can have a discussion about what has gone on for 15 years and compare state spending vs. school spending but the question was about this year's budget. If we lost 20 percent in one year, then there should be a serious discussion, but it's a 1 percent decrease this year.
"The heart of my concern is that citizens need clear information and analysis to understand what the problems are and what the solutions are," Dale said. "The more misleading information we provide to people more difficult it is for people to make decisions."
Ed Fund redux
A penny on the tax rate is the equivalent of roughly $10 million. About 4 cents of the total statewide property tax rate comes from changes to the Education Fund.
Dale says there are a number of factors that have eroded the Education Fund. He points to $19 million in one-time money the state used to balance the fund last year that must be replaced. The grand list (the value of property statewide) has declined, which means tax rates have to be raised in order for the state to collect the same amount of money. Additionally, the state has become more dependent on the property tax as the predominant source of funding for schools as sales tax receipts have declined. In 2005, the property tax was 61 percent of the Education Fund; in 2014, it represents 68 percent of the revenue.
"Instead of wild and crazy school spending there's all these other variables," Dale said.
In addition, the General Fund transfer to the Education Fund was reduced in fiscal year 2012 when lawmakers agreed to change the statutory requirement for inflationary increases and reduced the transfer by $27.5 million. Under statute, the transfer that year should have been $309 million. That year schools were asked to reduce spending by a similar amount. Though lawmakers tried to make up the difference later with surplus monies, the transfer is still below where it would have been had it kept pace with inflation. The transfer in fiscal year 2015 will be $295.8 million, according to the statutory formula, as noted in the latest spreadsheet from the Joint Fiscal Office.
Rep. Carolyn Branagan, R-Georgia, who serves on the House Ways and Means Committee, says lawmakers and the Shumlin administration are to blame -- not school boards. Branagan says the current funding system is outdated and must be reformed.
In addition, she says the Legislature has allowed the Education Fund to be eroded by expenditures on programs that are not strictly part of K-12 schools, as prescribed by Act 68, the state's education funding law.
Over time, the Education Fund has been used to pay for added costs for prison education and adult education and literacy programs. These programs total about $10 million. Pre-K and early colleges are also putting additional pressures fund on the Ed Fund, but figures are not yet available for these costs.
Dale says local school board members are miffed at the governor for making it even more difficult for them to pass budgets this year.
Though early estimates show there will be an average increase in statewide school spending of 3.8 percent, he says many schools will be increasing their budgets well below that mark, between 1 percent and 1.5 percent. "A lot of schools have done a great job of digging deep," Dale said.
In central Vermont, schools have considered "stabbing cuts," he said. Berlin, U-32 and Montpelier have looked at severe reductions.
"It's a lot of work keeping budgets down, and the unique situation we're in is budgets will show low increases, yet property tax estimates are very high," Dale said.
In some towns that increase school spending 2 percent to 3 percent, tax rates will go up 8 percent to 13 percent, and in a few communities rates will go up 15 percent, he said.
This confuses voters who might vote against a budget because they don't want to pay higher taxes and don't understand the tax structure, he said.
Eve Frankel, a member of the Waitsfield School Board and the chair of the Washington West Supervisory Union Executive Committee, and Heidi Spear, who is the chair of the Fayston School Board, wrote an open letter to Shumlin imploring the governor to reform the tax system, which they say is too complex for voters -- and even lawmakers -- to understand.
Last year, they wrote, their district increased school spending by 2.2 percent and that "translated to a 9.2 percent tax increase." One of the biggest cost drivers for Washington West is "unfunded state and federal mandates," including "common core implementation, multiple learning pathways, added staffing for events where concussions might occur, early education universal choice the list goes on."
Spear and Frankel push the responsibility for the conundrum of difficult choices school boards face back at Shumlin and the Legislature.
"Rather than pitting community member against community member, what we need from you, the Legislature and the Agency of Education is management and accountability for actual spending in education delivery, simplification of the funding formula, incentives that reward cost containment efforts, and real insight into how to optimize staffing and outcomes while fulfilling our state and federal mandates," they wrote. "We school board members should not be your scapegoats for real problems, while you avoid doing the work of championing and delivering constructive reform."
House Speaker Shap Smith says the problem has been that there is "no resolution in the body politic" regarding the tension between local control and statewide financing. The groundwork, he says, hasn't been done to make significant changes at this point.
Smith supports consolidating supervisory unions and changing the governance structure for school districts in the near term. Down the road, he says the state should "look pretty seriously" at consolidating schools. He doesn't anticipate major legislative changes this year, however.
Donovan says the Legislature's voluntary school district consolidation incentives haven't worked, and she's tired of "nibbling at the edges." she plans to introduce a bill that would create a three- to four-year "road map" that would gradually eliminate supervisory unions and introduce a new system for school districts that would have one board, perhaps two high schools and 6-10 elementary schools.
"The Legislature is going to lead on this," Donovan said. "It's time for a reasonable plan."