Gov. Scott Unveils New Plan To Avoid Property Tax Increase, But Democrats Are Skeptical

May 1, 2018

The administration of Gov. Phil Scott says Vermont can reduce payroll expenses in public schools by more than $250 million over the next five years, without imposing a legislative mandate that requires districts to adhere to new staffing ratios.

With just two weeks until lawmakers are scheduled to close out the 2018 legislative session, the Scott administration unveiled its long-awaited plan Tuesday to avoid a property tax increase next year, and also to curb the rate of growth in education spending over the long term.

What the plan entails: 

The big reveal focused primarily on the same theme Scott has been hammering since last year: staffing levels in public schools that are now among the highest in the country.

But in a notable break from past proposals, Scott’s aides now say Vermont does not need a statutory mandate to reduce the number of people working in Vermont schools.

“We went in and we said one way to do it is with a mandate,” Administration Secretary Susanne Young said Tuesday. “There doesn’t seem to be an appetite for that.”

Young was referring to a proposal unveiled by the administration last week that would have imposed potentially stiff financial penalties on districts that fail to comply with a target student-to-staff ratio, established by the state.

Lawmakers rejected the proposal as a non-starter, saying a blanket ratio for all districts fails to acknowledge the unique factors — district size, level of student need — that drive staffing levels in individual districts.

"We went in and we said one way to do it is with a mandate. There doesn't seem to be an appetite for that." — Administration Secretary Susanne Young

Young says the administration appreciates lawmakers’ concern that “one size does not fit all.”

Acting Education Secretary Heather Bouchey says the administration has instead proposed a different path forward to what she hopes will be the same result.

“We’ve proposed to set up a task force or a work group that would work this summer so that we could actually work with local education agencies, local systems, to figure out what would best work for them,” Bouchey says.

Young says Act 46, the district-consolidation law passed by lawmakers in 2015, is already beginning to generate operational efficiencies. And she says the administration believes those new education governance structures will lead to natural reduction in school staff.

Young says the administration is confident enough in the outcome of those staffing reductions that it’s booking $262 million in reduced spending over the next five years.

“So I think what you see here is our looking at the data and looking at what can be achieved reasonably at the local level,” Young says.

Those anticipated savings are critical to the administration’s overall education plan.

The plan the governor unveiled Tuesday uses $58 million in one-time money to keep property tax rates stable in fiscal year 2019. But the plan also relies on future reductions in education spending to pay back some of those one-time expenditures.

The impetus behind that plan is the 7-cent increase in statewide property tax rates that homeowners and businesses face next year, if lawmakers and the governor do nothing. Scott says taxpayers can’t afford the hike, and the plan he unveiled Tuesday uses $58 million in one-time money to keep rates stable in fiscal year 2019.

But the plan also relies on future reductions in education spending to pay back some of those one-time expenditures. And if the staffing reductions needed to achieve those savings targets don’t materialize, the ledger could become unbalanced.

“There is an element of risk here,” Young says.

The one-time money comes from a variety of sources, including a legal settlement with tobacco companies, reserves from the state’s general operating budget and a $24 million surplus expected in this year’s budget.

Staffing reductions aren’t the only method Scott proposes using to drive down education costs. The administration also wants to retool something known as the “excess spending threshold,” which penalizes districts whose per-pupil spending exceeds 121 percent of the statewide average.

Scott proposes lowering that threshold to 110 percent, a measure the administration says would reduce education spending by an additional $35 million over the next five years.

Scott is also proposing changes to “income sensitivity” provisions, which limit property tax exposure to people with household incomes of less than about $140,000.

Young says the administration’s proposal acknowledges the harsh realities of changing demographics in Vermont. Student enrollment is down from a peak of more than 100,000 students to 76,000 students this year — and Young says that number is projected to drop by another 7,000 students in next eight years.

“Vermont has great schools, it has great teachers, it delivers a good education,” Young says. “But our demographic challenges are contributing to a K-through-12 system that’s inefficient. It’s outdated, and it’s really unaffordable.”

Democratic lawmakers react:  

The reaction to the plan from Democratic leaders at the Statehouse was swift and mostly negative.

Bristol Rep. David Sharpe, who chairs the House Education Committee, says the governor's plan to use one-time money to hold down property tax rates is fiscally irresponsible — Sharpe compared it to "paying the credit card off and then putting a lot more on the credit card the next day."

House Speaker Mitzi Johnson said tapping into a number of reserve funds in order to avoid a property tax increase is not the best use of that money.

"The biggest flaw with this plan is that it drains all of those reserves," said Johnson. "It really destabilizes some of our General Fund for short-term gain."

"The biggest flaw with this plan is that it drains all of those reserves. It really destabilizes some of our General Fund for short-term gain." — House Speaker Mitzi Johnson

And Johnson says a tax plan passed by the House earlier in the session is a better approach because it shifts some of the burden of paying for schools from the property tax to the income tax.

“Where decisions on spending had tax consequences that ... people really understood," Johnson said, "so that when your community spent more, you paid more; when your community saved, your taxes were reduced."

Senate President Pro Tem Tim Ashe says he's concerned that the governor's plan assumes that there will be a large reduction in teachers in the coming years. He says mandatory cuts may be necessary to achieve those staff reductions.

“There's a reason why mandatory cuts to schools is so unpopular throughout the state right now because every district is different, so managing personnel smartly makes sense but a one-size-fits-all approach would be quite devastating to schools throughout the state,” said Ashe.    

The administration's plan will now be reviewed by the House and Senate Education committees.

The governor has pledged to veto any bill that raises property taxes.