Act 46: Lawmakers race to change school tax

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Last spring, Vermont lawmakers agreed, after a long fight, to place strict limits on school spending.

But now some members of the Legislature regret the tax penalty they created.

The spending penalty in Act 46 is supposed to restrict increases in the education tax for two years and save taxpayers millions of dollars — but as schools strain under the budget pressure, Gov. Peter Shumlin and legislators are racing to undo their own work.

Burlington schools are talking about reducing administrative staff and eliminating classes. Charlotte is struggling to find staff reductions, including para-educators and a receptionist. Williston is considering cutting technology resources, teachers and other staff.

"We really are affecting student education with these cuts, there's no doubt," said Kevin Mara, chairman of the Williston School Board, who said he spoke personally and not on behalf of the board. "It's too much, too fast."

Each school district in Vermont faces a custom limit on budget growth per student. Taxpayers will be billed twice for any spending above the limit.

"Too often we look for rapid short-term solutions without realizing all the consequences, and I believe that's what the spending caps turned out to be," said Sen. David Zuckerman, P/D-Chittenden.

Lawmakers returning to Montpelier next week fall into roughly three camps:

• Repeal the spending limits.

• Modify the spending limits — either by giving school districts more wiggle room, or by delaying implementation one year.

• Leave the law alone.

Significant disagreement exists among the governor, Senate and House of Representatives about what should be done, and whether anything can be done in time to affect voting on school budgets in March. Schools are caught in the balance.

Zuckerman is pushing to repeal the spending limits right away — in the first or second week of January — as schools finalize their 2016-2017 budgets.

Shumlin and the Vermont School Boards Association have also stressed the need for action in January.

House Speaker Shap Smith would rather modify the spending limit than repeal it. He's skeptical about the chance of hammering out a plan in the first few weeks of the year.

"We have to be realistic about how long it takes," said Smith, D-Morristown. "It may be that a bill gets through by the end of January, but when you set deadlines, people see opportunities to help you miss those deadlines."

Health care costs hit the ceiling

The spending penalty was controversial from the start.

The House of Representatives fought for the mechanism to be added to Act 46, the education law that encourages school districts to merge over the next few years. It is the only piece of the law that addresses property taxes in the short term while Vermont's public school system adapts to fewer students.

The Senate reluctantly agreed to include the spending penalty as part of a last-minute compromise at the end of the last session, even while the American Civil Liberties Union in Vermont worried that the limits were unconstitutional.

Vermont school districts have raised an outcry over the spending limits, in part because their health care premiums are slated to rise 7.9 percent next year.

"I don't think that this was anticipated when we were looking at the thresholds," Smith said.

School districts have seen their health care costs rise 10 percent, 4.5 percent, and 4.5 percent in the last three years, respectively, said Laura Soares, president of the Vermont Education Health Initiative, which offers health plans for teachers and other school employees.

"We do recognize that a 7.9 percent increase in health care is incredibly challenging with the allowable growth rate of Act 46," Soares said.

If lawmakers decide to repeal the penalty in January, school districts would have more flexibility to increase spending.

School districts would continue to face a previously-existing tax penalty if they spend much more than the statewide spending average.

Keep or repeal?

Vermont school boards and superintendents have urged the Legislature to repeal the penalty and replace it with something new.

"Action needs to be taken no later than the end of the second full week of the session in order to affect school budgets before they go to the printer," Nicole Mace, executive director of the Vermont School Boards Association, said in an email.

Zuckerman and Sen. Ann Cummings, who serve on the Senate Education Committee, agree and want to repeal the spending penalty.

"I'm not convinced that the problem is that schools are spending too much on education," said Cummings, D-Washington.

Shumlin wants to repeal or postpone the penalty, and has reached consensus with key legislators toward an agreement in January, said spokesman Scott Coriell.

Rep. David Sharpe, the Democratic chairman of the House Education Committee, said the agreement with Shumlin is informal rather than a written document

"There's no backroom deal," Sharpe said. He hopes to get something done by Jan. 15, but he said getting the House, Senate and governor to come together will be a challenge.

Sharpe defends the spending penalty.

"It's part of the vision behind Act 46," Sharpe said. Instead of repeal, he and House Speaker Smith are hoping to raise the limits to give school districts a bit more wiggle room.

Rep. Don Turner of Milton, who leads House Republicans, wants to leave the law alone.

Turner criticized Shumlin's move: "Now that the school districts are putting a little pressure on him, he's backing away," Turner said.

Regardless of the exact timeline, the topic will likely dominate education policy conversations as lawmakers return to Montpelier.

The House and Senate may also consider other changes to Act 46, which encourages school districts to merge by 2019.

Cummings, the head of the Senate Education Committee, recently filed a bill that would extend the timeline in the law and give school districts until 2021 to merge.

Sharpe, the head of the House Education Committee, dismissed the idea.

"Many school districts across the state have engaged in serious Act 46 conversations," Sharpe said. "Now is not the time to delay the benefits of Act 46."


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