May 25, 2018 Legislative Update

Sigh.

I held off on an end-of-session update to be able to include the outcome of our special session last week, but we did nothing but “gavel in and gavel out.”

It turns out that while the governor can call us into a special session, we, the body (which actually means the leadership), can then decide how long it goes.

Since the leadership wants more time to work in committee and also pass new bills, we’re breaking for a week to allow that work time, and then reconvening next week, probably for several days.

A solution to the stalemate between the governor and the legislature seems daunting, given the non-negotiable positions they have laid out on the budget and taxes.

I’m going to try to summarize what those are and share my perspective, understanding that everyone’s description of the facts is biased – intentionally or not -- based on our own points of view.

Understanding what happened last year is absolutely critical to this year’s stalemate.

The governor wanted to protect Vermonters from a big jump in property taxes, and a change that was occurring in teacher’s health insurance gave a unique opportunity to shift to a statewide contract and save an estimated $17 million.

The legislature refused to make the insurance change, leading to a veto of the budget and tax rate bills.

The compromise was a façade, and both sides could claim victory: no insurance plan change, but the $17 million was saved.

How? A big part of it was through using reserves to fill in the education fund. What we knew was that this would only defer the issue for a year and carry the deficit over to this year – and so here we are.

That deficit increased further for all the standard reasons of costs and higher budgets, despite school boards keeping a tight line on budget increases.

The core of our education financing is that local voters decide on budgets, and the state government then sets the tax rate necessary to fund those budgets.

In that sense, the House and Senate leaders are correct in saying that we are not the ones raising property taxes: the voters made that choice, in budgets adopted both last year and this.

But it’s more complicated than that.

First, we made the outcome artificially low last year, something voters would not have known in understanding budgets this year.

Second, our financing system, in its efforts at equity, create a disconnect.

Despite what a Northfield or Berlin voter decides about a local budget – and despite how restrained it might be – it is what all our school districts spend statewide that results in a large part of the rate that everyone pays.

So the governor is correct in saying that raising rates “because the voters made knowing choices” is a false attribution.

We, in state leadership, have done little over the years to either restructure the system or to help lay out a path for more sustainable budgets that reflect our shrinking number of students. (School consolidation makes sense for educational opportunity, but not for significant cost savings.)

As students go down but staffing stays the same, we end up in the situation of having both the highest per-pupil costs and the highest student-teacher ratio (by far) in the nation, without better educational results.

Something is wrong with this picture.

So the governor wants two things: a series of steps in a five-year plan to reduce costs, and an up front investment this year – money borrowed from the general fund – to keep the tax rate from going up.

The savings, he believes, will not only pay back the loan but also keep rates the same for five years plus generate more money that can be reinvested in other needs – higher ed or pre-K, for example.

The legislative leaders oppose the plan for two reasons.

They are skeptical of the savings and not supportive of some of the more aggressive measures, such as putting pressure on schools to reduce staffing ratios.

The source of the money is a bigger problem.

It is what is called “one-time money,” meaning we won’t have it from ordinary tax revenues next year. It comes from a settlement we received from past tobacco litigation.

So next year, if we don’t achieve the savings, we are stuck again with an even big gap and facing an even bigger rate jump.

I think it’s a mistake to keep tax rates down artificially through mechanisms that only push the problem down the line for a year. We already did that last year. Banking on a future savings plan is risky.

And if rates keep staying artificially stable, why would voters think there is any need to start reconsidering local budget in ways such as evaluating staffing ratios?

However, the education funding bill the legislature passed is also very problematic because it does little to help address the core problem of property taxes increasing faster than the economy, despite fewer students.

It also does nothing to add protection for low-spending towns having to pay towards higher-spending towns. That would be easy to do, by reducing the percentage of state payments versus locally raised money to pay local budgets.

In other words, I think the governor’s five-year savings plan is solid. I voted against the education funding bill because it lacked measures that could have and should have been included to put more pressure on “high spenders.”

But we shouldn’t rely on these potential savings in advance and borrow one-time money that will have to be paid back from the core statewide budget in future years.

There is one piece to both sides that isn’t getting much notice. Both what we passed and what the governor proposes includes a built-in tax increase for some taxpayers, mostly middle-income ones.

One of the biggest costs to our system is the money we pay back for income sensitivity, so that at lower incomes – actually, all but upper incomes -- taxes are paid based on income level rather than property value.

That gets capped at a homestead value of $300,000, and the cap is being reduced. Those making more than the medium income in Vermont but with higher value homes will thus be seeing a tax increase, regardless of which plan (or what compromise) is eventually adopted.

Stay tuned.

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A lot of bills were passed in the last week of the session, and some that didn’t quite make deadline will get passed during our special session. Whether that’s good or bad will depend upon whether you support the bill.

One that is being taken up in my Health Care Committee is a bill that requires lower co-pays for chiropractic visits, on the theory that the co-pays should fall somewhere between a primary doctor co-pay and a specialty co-pay rather than as a specialty visit.

I think it requires more thought about overall impact on health premiums and how we spread costs, but there is some good logic behind it. The problem is that we are now heading into June, and the insurance rate-setting oversight process is well underway.

A lot of work would have to be re-done to incorporate it at this point in time. The boat has been missed. I think we need to wait until next year, not jam it through in this late, special session.

Another one is a bill that makes changes to Act 250 to protect forestland. I think it has some solid features. But the state has a major study underway – under the legislature’s directive – on broader Act 250 revisions, and it is due out this fall.

So that’s another one that I think needs to wait.

Then there is the bill that adds yet another piece to our “we must do something about Fair Haven” changes in law (whether they make sense or not.)

This one relates to threats being make against a school, and whether they result in reasonable fear being experienced by “any person.”

I was assured by our House Judiciary Committee it had no interest in moving this, so I held off on preparing an amendment to ensure it was limited to when the fear caused to others was foreseeable and intentional on the part of the person making the threat.

Now the bill is being moved forward again. After all, we have extra time!

Consider what just happened in Randolph.

Two kids get in a fight; one says in anger that he’s going to “shoot up the school.” We used to say, “your mamma wears Army boots” as our fighting words, but school shootings are what’s in all the news.

Does he realize the other kid is going to report this to his parents, who report it to the police, who report it to the schools for a precautionary districtwide school closing until investigated, which thereby strikes reasonable fear in many parents’ hearts?

(What if it got reported on social media, and someone in Arizona was put in fear of what might happen in Vermont?)

Under this proposed law, the kid would be guilty of a felony-level crime, punishable for an 18-year-old by three years in prison.

I know times have changed since it was a day’s suspension for calling in a bomb scare to get out of a test. The fear of something actually happening is real.

I still think we should punish based on the fear a person intends to cause, not an unforeseen impact on any other person under the sun.

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Please stay in touch as you hear about issues affecting you and to keep me informed about your views. You can reach me at adonahue@leg.state.vt.us. You can find all of my updates at representativeannedonahue.blogspot.com. Thank you for the honor of representing you.