Analysis: Pass or fail, school consolidation a powder keg for lawmakers

A bill that would mandate the consolidation of Vermont's 270-plus school boards has been on life support for weeks, but there are signs that H.883 will re-emerge this week on the floor of the Vermont House.

The legislation, H.883, has been declared dead on arrival at least a half-dozen times since it was passed out of the House Education Committee on March 21, well after the crossover deadline. Two other committees in the House have taken it up since then, and there is growing consensus among leading Democrats - namely House Speaker Shap Smith and Gov. Peter Shumlin - that something has to be done to restructure education before the end of the session.

But there is a reason for the ongoing handwringing. Lawmakers in this election year are torn between taking some action they hope will make schools less costly and more efficient, and alienating local school board members whose positions stand to be eliminated in the restructuring process.

H.883 would eliminate 282 school districts, along with their school boards, and reconstitute the school governance structure to include roughly 45 to 55 supervisory districts with a minimum of 1,000 children. (Vermont has more school districts than towns; nearly every district has its own board. The state has the highest school board member to student ratio, 1 to 56, in the country.)

Either way, they are faced with a lose-lose political situation in their home districts.

Taxpayers are in a balky frame of mind going into the 2014 election season, and as time runs out this biennium, school board consolidation plans have picked up support as lawmakers come to grips with the realization that they need to show voters they've made an effort to address rapidly rising statewide property tax rates.

On the other hand, lawmakers are also feeling heat from school board members who oppose the elimination of local authority over management and budget decisions. They fear that nixing some 1,440 school board positions could spell their doom when they go back to their home districts to campaign.

It's not an unreasonable fear. School boards are a training ground for local politics, and many school board members oppose the idea of eliminating local jurisdiction over budgets and management. They say that creating a supervisory district board with members who represent different towns (similar to existing unionized high school boards) will destroy community involvement in local schools. Ultimately, critics of the plan say consolidating school districts is tantamount to closing schools.

Some Republicans say there is nothing wrong with Vermont's small school district structure, the problem is with the statewide property tax formula.

While Smith and Shumlin back education governance reform, the Senate is less than enthusiastic about supporting the realignment of districts. Sen. Dick McCormack, D-Windsor, chair of the Senate Education Committee doesn't see the need for restructuring because local school boards already have the option to voluntarily merge with other districts under Act 153. With the tacit support of the education committee, Sen. Tim Ashe, D/P-Chittenden, is giving over a portion of the property tax rate bill to consolidation of school district business administration at the supervisory union level.

The bottom line? The voluntary consolidation program under Act 153 has been a failure. There is no appetite to change Act 60, the education financing law this year, despite a growing realization in the Statehouse that property tax rates are going up in districts where spending has been reduced because of pressures on the Education Fund.

Taxes will continue to go up unless lawmakers take action, according to Bill Talbott, the chief financial officer of the Agency of Education.

Education spending has continued to increase over the past 15 years as the public school student population has shrunk by 20 percent from a high of just over 100,000 to about 80,000 students. Meanwhile, staffing at local schools, which represents about 80 percent of school spending, has stayed relatively constant, at around 18,400, Talbott says.

Unless districts reduce staffing levels, Talbott said budgets will automatically go up 3 percent a year to cover contractual obligations. A 1 percent reduction, he said, would be the equivalent of $11 million and would mean the elimination of 184 school positions statewide. Even small savings from restructuring, Talbott says, would be worthwhile. Transition costs for the realignment would be between $3.6 million and $5.3 million a year for a three-year period.

"The question is, does this current structure allow school boards to do that (reduce staff)?" Talbott said. "Would H.883 give them more options? It certainly looks to me like it would."

Talbott says if small local school districts joined forces as part of larger supervisory districts, they could share teachers, administrative costs and transportation contracts, and eliminate layers of unnecessary management, ultimately saving additional money.

"If we keep doing the same thing, we're going to get the same result," he said.

The hammer is year over year property tax rate increases - even in many towns that have cut spending. That's in large part because statewide rates are going up (5 cents last year, 4 cents to 7 cents this year and another 7 cents to 9 cents per $100 of assessed value next year). The rate hikes reflect average spending increases across districts statewide, the erosion of the Education Fund (The fund is used to pay for an assortment of non K-12 programs such as adult basic education, preK, dual enrollment, schooling for prisoners) and a reduction in the General Fund transfer to the Education Fund of $27 million (the transfer was "rebased" in 2011 and was not increased by inflation as statutorily required).

Taxpayers in many towns are starting to balk at the increases. This year, 35 towns rejected budgets, the highest number since 2003.

House Speaker Smith says if the Legislature doesn't take steps now, schools will close without a plan in place. Smith is determined to "look at every possibility."

"I believe something has to happen," Smith said. "If you asked most Vermonters, they'd agree. The challenge is whether there is a common understanding of what needs to happen. People believe there should be fewer districts, they're just not sure whether theirs is the one that needs to go.

"We are going to see changes over the next couple of years, the question is whether we can help manage those changes," Smith said. "I don't think this issue is going away. We can't continue to have the challenge of increased spending with fewer students. The consequence is pressure on the Education Fund and property taxes."

Pressure will continue to build on the property tax rate, he said, "until we get some changes in place."

Still, the end of the session is nigh and the bill has a long way yet to go. It must move through both the House and the Senate in three weeks. Smith said if it's going to move, it has to move soon, "otherwise we won't have enough runway."

House Appropriations is expected to vote H.883 out on Tuesday (it has been massaged by the House Education Committee in the interim, and significantly altered by House Ways and Means) and the bill will go to the floor on Thursday and Friday. That gives the Senate just two weeks to review the proposal before the estimated adjournment date.

The latest iteration of H.883

The House Education proposal has morphed since it passed 10-0-1 out of committee in late March.

The original version of H.883 gave districts flexibility with respect to voluntary mergers, gave the State Board of Education a role to play in vetting a statewide plan for consolidation, required legislative involvement, offered broad public engagement around the changes and set a deadline for implementation of the plan no later than July 2018.

House Ways and Means struck all the language in the bill (usually a move reserved for the Senate), and moved up the implementation deadline by a year. The plan calls for a set number of hearings (10), the drafting of a preliminary plan by April 2016, followed by the creation of a final plan that would be brought to the General Assembly by January 2017. The realignment would then automatically go into effect by July 2017 - unless the Legislature rejects the plan. The committee approved the strike-all language 9-2 (Reps. Patti Komline and Bill Johnson, both Republicans voted no) 10 days ago.

Since then, H.883 has bounced back and forth between House Appropriations, which has to approve funding for the transition costs, and House Education, which got another bite at the apple last week, and spent several days tweaking the House Ways and Means language. The new version of the legislation extends the deadlines for the plan by a year. The preliminary plan would be due in April 2017 and the final draft would be submitted by January 2018. The Legislature would be required to vote affirmatively to support the plan by July 1, 2017.

House Appropriations is expected to vote out H.883 on Tuesday; the bill is slated for the floor on Thursday and Friday.

Passage won't be easy. The House Democratic leadership has been counting votes - of members from all three parties. That's a sign that many Democrats are expected to break ranks.

Steve Dale, executive director of the Vermont School Boards Association, says his members could not support either version of the House bill. Dale says the consolidation plan is a "massive undertaking" that will require legal and financial support. He worries that the plan would not be "adequately resourced."

Senate passage doubtful

If the bill passes the House, the Senate would have just two weeks to review the complex proposal. Senators say they do not have enough time to deliberate on the merits and flaws of H.883.

Sen. Tim Ashe, chair of Senate Finance, is floating a provision that would be added on to the property tax rate bill, H.889. A draft of the bill requires that supervisory unions act as a centralized administrative clearing house for local school districts. The provision requires that supervisory unions offer the following services to districts: supply and equipment purchasing and distribution, contract negotiations, administrative and business management, special education services, data management and transportation.

An early draft of the Senate's version of H.889 also eliminates the excess spending threshold anchor to inflation and includes an expansion of preK education.


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