School districts across Vermont will be forced to reduce spending by $13 million over the next two years as part of a compromise in Montpelier that has cleared the political logjam holding up passage of the state budget.
The House and Senate gave final approval Wednesday night to a deal between Republican Gov. Phil Scott and Democratic legislative leadership that will affect school budgets already passed by voters back in March.
It was perhaps the most significant vote of the legislative session, but no lawmaker will be on the record voting for or against the proposal; the measure passed by voice votes in both chambers, since no one requested a roll call.
Scott, House Speaker Mitzi Johnson and Senate President Pro Tem Tim Ashe say the cuts will come from anticipated savings in health care plans for employees of public schools. The legislation then uses that money to lower statewide property tax rates.
“Residential property tax rates will be lower, and non-residential rates including businesses, renters and camp owners, will remain the same as last year, which is great news for Vermonters,” Scott said Wednesday.
With many districts already having negotiated those health plans, however, and no guarantee that outstanding negotiations will generate the savings lawmakers are now banking on, the compromise might require schools to meet the new mandate by making cuts to educational programming.
Seventeen school districts have already settled health contracts with employees; none hit the legislative “benchmark” that would be needed to capture the required savings entirely through lower health costs.
Stowe Rep. Heidi Scheuermann, a Republican, represents one such school district. While she says she appreciates urgency to drive down education costs, she says lawmakers and the governor have chosen the wrong mechanism for achieving that goal.
“And now our district is going to have to find significant savings in the [fiscal year] 2018 budget because we cannot reopen the contract,” Scheuermann said on the House floor. “And I find that unfair.”
Concern about the impact on schools transcends party lines. Hinesburg Rep. Bill Lippert says his district’s school board is on the verge of finalizing its health contract with local educators.
The legislation passed Wednesday will use a formula to calculate the amount of money that will be withheld from school districts for the fiscal year that begins July 1. That formula looks at what districts spent on health benefits last year, what they’d save if they adopted the benchmark plan — it would have teachers pay for 20 percent of their health insurance premiums, and also assume minimum out-of-pocket costs — and then calculates the required savings accordingly.
Lippert, who says he supported the compromise measure notwithstanding his concerns, says lawmakers don’t even know yet what kind of savings targets districts will be required to meet.
“My major concern is that we’re not going through the deliberative process that we ordinarily go through in the legislative process,” Lippert says. “We would in the ordinary course of process have a printout, school district by school district, saying this is the anticipated impact on your district … And my biggest concern is that we’re doing this … without the full deliberative process that I think Vermonters deserve.”
Bristol Rep. David Sharpe, the Democratic chairman of the House Education Committee, helped broker the deal with the governor.
Sharpe acknowledged that the plan is “going to be painful for some” districts. But he says health care costs are projected to be “so drastically lower” for schools next year, as a result of a wholesale shift in health plans, that most districts should be able to accommodate the new mandate with little trouble.
“The fact of the matter is these premiums are so drastically lower that you can make these 80-20 arrangements and still save a bundle of money, so in fact it’s not as much as a hardship as it seems to be,” Sharpe says.
Sharpe says it isn’t a perfect solution. But he says it’s far better than what the Republican governor had been calling for.
Scott wanted a statewide contract for teacher health contracts, all of which are up for renegotiation this year. The plans that cover public school employees are being overhauled in response to the federal Affordable Care Act, and actuaries predict a $75 million reduction in premiums.
Scott calls it a “once in a lifetime opportunity” to lower health care costs in the education system without undermining teacher health benefits. But he said a statewide contract, or some other intrusion into the local collective bargaining process, was the only way to ensure that result.
Lawmakers have said they’re unwilling to interfere in the collective bargaining process, at least not without more time to vet the potential impacts. The compromise measure announced Wednesday ensures savings, and encourages school boards to get the money from reductions in health care costs. But it ultimately leaves it to districts to decide where the money comes from.
Nicole Mace, executive director of the Vermont School Boards Association, says districts that have already negotiated health plans, or districts who find themselves unable to negotiate to the new benchmark plan adopted by lawmakers, will be forced to make some difficult financial decisions as a result of the legislative compromise.
“They’ll have a few options available to them: find the savings elsewhere in their budget, use reserves, or run a deficit,” Mace says.
Ashe and Johnson concede the timing isn’t ideal for districts. But they say Scott’s budget veto forced them to bargain.
“I think compromise is successful when nobody gets everything they want, and nobody walks away with their last choice option,” Johnson says.
The compromise proposal is similar to an amendment adopted by the Senate back in May; Scott at the time rejected that plan, saying it wouldn’t guarantee that the savings derive exclusively from reductions in health care costs.
“And that’s one of the areas of controversy in some respects, that they’ll have to find the money somewhere,” Scott says.
Scott says he pressed hard for his position, but that he ultimately relented on that point.
“During negotiations, you have to compromise,” Scott says. “And I wasn’t willing to go into July 1 without a budget, so we came to the table with the right attitude, trying to find compromise.”
The Vermont School Boards Association and Vermont Superintendents Association issued a memorandum on Tuesday warning lawmakers again any framework that mandates savings in this coming year’s school budgets without also making changes to the collective bargaining process.
Jeff Francis, executive director of the Vermont Superintendents Association, says those changes are needed to give boards the tools needed to successfully negotiate health benefits savings.
“If we’re not able to alter that construct in any form or fashion, then we regrettably will be destined to an education system and funding system which is going to be driven by health care costs, which are going to be really, really hard to get a hold on one district at a time,” Francis says.
While the language in the compromise deal doesn’t “alter that construct,” Mace says the proposal has merits.
“It provides both parties with a really clear benchmark to negotiate around. And they will have to understand that anything that exceeds that target will have to be made up somewhere,” Mace says. “I think for places that haven’t settled, this is a useful step. It doesn’t go as far as we had hoped for, but it is a useful tool to have, if I’m a school board in negotiations.”
The compromise also requires all districts to negotiate two-year health contracts, which Ashe says means the “once in a lifetime opportunity” Scott referenced will return again in 2019.
Mace says she thinks the language will demonstrate to boards that Montpelier is serious about health care savings. And if districts aren’t able to negotiate to the Legislature’s benchmark plan, she says she thinks that will show the necessity for a statewide teacher contract in 2019.
Darren Allen, communications director for the Vermont-NEA, takes a far different view of that provision.
“The reopening of all health care contracts in two years ensures that the chaos will continue,” Allen says.
The teachers union has vehemently opposed any direct intrusion into the collective bargaining process. Allen says the 50-year tradition of local bargaining has empowered communities to negotiate deals that work for the educators, students and taxpayers living there.
“The best we can say about” the compromise, Allen says, “is that it prevented the complete takeover of collective bargaining over health insurance sought by Gov. Scott, the Vermont School Boards Association, and the Vermont Superintendents Association.
“Unfortunately, this backroom deal is going to make it harder for local school boards to make decisions that affect their local communities,” Allen says. “It’s going to completely disrupt the bargaining process.”
Updated 7:40 p.m. to include further reporting.