Budget Standoff

June 18, 2018

Twice since the 2018 Special Session began in June members of the House Ways and Means, Appropriations and Education committees heard from the senior members of the Governor’s Cabinet. Present were Adam Greshin, Commissioner of Finance and Management; Kaj Samsom, Commissioner of Taxes; Mike Pieciak, Commissioner of Financial Regulation and Heather Bouchet, acting Secretary of Education. While their demeanor was beguilingly civil, the Administration’s message remains remarkably clear. Do as we say, period.

 

Governor Scott vetoed the budget twice, but it’s not the budget he objects to. In fact there is nothing in the original spending plan he doesn’t like. Instead his intention is to dramatically reduce school spending and decrease the number of teachers statewide. Some of his tactics are straightforward while others are decidedly underhanded.

 

Governor Scott wants to spend at least $45 million in one-time funding to hold average statewide property tax rates level for 5 years. One-time funding is non-reoccurring revenue that, once spent, is not available in following years. Last year, Scott insisted on using a similar amount of one-time funding. That resulted in a $45 million hole in the Education Fund that we are desperately trying to fill right now. Using one-time funding again will result in an even bigger hole in the Ed Fund next January, and the cycle will worsen year after year.

 

The Governor is betting that Vermont property values will continue to rise, resulting in a larger tax base and more revenue. But if his bet doesn’t play out the Ed Fund could shrink. Without sufficient money in the bank, local school districts and local voters will have to make up the difference, either out of their own pockets or by slashing school budgets. And that may well be the Governor’s intention.

 

As Tim Briglin explained in his recent post, the legislature doesn’t raise property taxes; voters and school districts do. The Legislature merely sets statewide tax rates to balance the Ed fund and keep abreast of school spending. The Ed Fund was created in Act 60 and is designed to be self-regulating. It’s worth noting that as long as Vermont properties continued to rise in value, as they did before 2017, the Legislature could decrease statewide rates, even as school spending increased. That all changed with the Great Recession when the economy tanked.

 

Governor Scott’s voice can be heard statewide proclaiming he wants to hold average property tax rates steady for 5 years. As mentioned above, the use of one-time spending will result in a hole in the Ed Fund. He claims that provided the Legislature, schools and local voters follow his plan, one-time funding will be repaid. The administration claims savings will begin to accumulate in 2020, and those savings “could” be invested in postsecondary education and innovation. But there is no guarantee saving will materialize or that his administration will want to invest them as proposed. Who knows where the economy will be in several years?

 

What’s important is that statewide property tax rates are only the noisy part of this debate. At the local level, it’s local school budgets and resulting local tax bills that taxpayers experience. Many local school taxes will rise. Savings or not, holding average statewide property tax rates low will provide less to the Education Fund unless yet another infusion of one-time money can be found. And shorting the Ed Fund will mean that local taxpayers will inevitably pay more.

The second thrust of Scott’s plan is to dramatically reduce the number of teachers statewide. The administration claims to be developing “tools” to help school boards figure out how to reduce staffing levels. Those tools may help, but if there is less money available for local schools, school boards will have to reduce staff whether it’s good for students or not. The result will be that small local schools will be unable to provide adequate education and will have to close. Both education and the quality of life in smaller Vermont towns will suffer.

 

Governor Phil Scott’s tax stabilization and education funding plan is not really about keeping statewide property tax rates low. It’s about cutting teachers and slashing education funding to communities that can least afford to lose out, regardless of the impact on the Vermont we love.

For an additional perspective on this issue, read Representative Sam Young’s recent post from the Caledonian Record. Sam is a fellow member of my committee, Ways and Means. He lives in Glover.

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