What just happened with Act 46?
Last Spring, Vermont lawmakers wrote Act 46, a new law designed to control education spending — which has been driving up property taxes across the state for years, despite a decline in the number of students. Act 46 addressed these problems by encouraging schools to consider mergers through tax incentives and grants for schools that consolidated. At the same time, benefits to small schools and schools with declining enrollments were to be reduced over time. Finally, Act 46 established an allowable education spending growth on a sliding scale for each district, based on a district's spending in the prior year. Districts that exceeded their allowable growth faced stiff tax penalties. In essence, the intent of the legislation was to generate savings from consolidation by incentivizing schools to merge, and to penalize districts that overspent, thereby providing some property tax relief for Vermonters.
But the legislation didn't exactly work out as intended. First, some have argued that the tax incentives given to schools that consolidated could offset most of the administrative savings from consolidation. Second, the Agency of Education misinterpreted a certain section of the law by miscalculating education spending in a way different than the Legislature intended. More importantly, however, the spending caps and penalties had numerous unintended consequences. While there certainly are districts that overspent, many education costs are unable to be controlled by each district. For example, in 2015, health insurance costs for districts spiked by an unexpected 8 percent, which made it extremely difficult for school boards to stay within the allowable growth provisions of Act 46. In other cases, schools faced uncontrollable increases in education spending due to the cyclical nature of certain costs that were beyond their control. These districts — many of whom simply couldn't control their excess spending — wound up facing heavy penalties under Act 46 for exceeding spending caps.
It was clear to lawmakers that the law needed to be modified. In fact, there were plenty of ways for legislators to mend Act 46 to protect schools that were unfairly burdened, while keeping in place cost-containment provisions that prevented unnecessary property tax hikes. For example, lawmakers could have replaced the "school district prior year spending" figure used to determine a districts allowable spending growth with a 5-year average, which would have accounted for cyclical education costs. Similarly, lawmakers could have excluded health care costs from the threshold formula or put health plans in the State exchange, which would have prevented these uncontrollable costs from imposing penalties. But, after days of back-and-forth between the House and Senate, the final bill modifying Act 46, S.233, was far from perfect.
S.233, made a number of changes to Act 46 that will likely contribute to Vermont's education finance crisis. First, rather than trying to modify Act 46 to address those districts that were faced with uncontrollable education costs, the new bill indiscriminately reduces high-education spending penalties across the board by 60 percent. Second, S.233 increased allowable education spending growth across the board by 0.9 percent for all districts. Again, rather than focusing on the uncontrollable education costs, lawmakers simply removed these two efforts at cost containment. S.233 also repealed ALL penalties and thresholds for fiscal year 2018 — effectively eliminating all the cost containment mechanisms contained in Act 46 for the next fiscal year. Finally, districts that had per pupil spending below the statewide average in the current fiscal year were exempted from any spending penalties. However, this exemption, in combination with the elimination of spending thresholds for FY18, encourages districts that are currently low spending to, as one lawmaker put it, "spend to the moon" in next year's budgets.
Even more disturbing is that, apparently, some lawmakers didn't even understand what they were voting for. Local Rep. Patti Komline polled eight Senators the day after they voted for this provision, asking them what the statewide average spending limit was. According to Rep. Komline, "Two of them knew the number, two had a number that was significantly higher than the average, and the others had no idea what that figure was. This is what happens when we are more focused on getting something done rather than getting something right."
Worst of all was the process by which S.233 was passed. The Senate passed what turned out to be the final version of S.233 on Thursday, Jan. 28. Normally, the way legislative rules work, is that a bill is placed on the "notice calendar" the next day, so lawmakers can have a chance to read it before voting. If this procedure were followed, the House of Representatives would have been given notice of S.233 on Friday and would have had the weekend to speak to their school district business manager, talk with constituents, and carefully read the legislation before voting on it. However, Speaker Shap Smith tried to rush passage of the bill by suspending these procedural rules, attempting to force the House to vote on the bill Friday. Republican lawmakers — who wanted to return home and speak with constituents before voting — refused to suspend the rules. Smith used a parliamentary loophole to keep bringing the rules-suspension measure before the House until late in the day Friday, with the hope that enough Republicans would head home for the weekend, thereby giving him the necessary votes to suspend the rules. Eventually, the Speaker forced lawmakers into meeting at a special session Saturday at midnight to vote on the legislation, where it passed along party lines.
Rather than carefully considering legislation and talking with constituents, the House rushed through a bill that removes necessary cost-containment measures. And instead of tailoring modifications of Act 46 to districts that were unfairly penalized, the Democratic majority removed property-tax reduction measures across the board. All of this was done through an expedited process that forced lawmakers to rush through a bill at midnight — literally — rather than going home to talk with their constituents. Even former Democratic Gov. Howard Dean had this to say about the bill: "I must side with the House Republicans on this one. Vermonters keep complaining about property taxes going up, and the Legislature just removed the only way they have currently which would help, as of 2018. Raising other taxes to backfill education, which we have done for 20 years, clearly has not worked. I think last nights 'compromise' was a significant step backwards."
Hayden Dublois lives in Manchester. He is an economics student at Middlebury College and a recent graduate of Burr and Burton Academy.
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