 Vermont PBS, in cooperation with Orca Media and the Vermont Press Bureau, presents Capital Beat, the Week in Review, from the Vermont Statehouse. Here's host, Neil Goswami. Welcome, everyone, to Capital Beat. I'm Neil Goswami with the Vermont Press Bureau, and we're very pleased to have you with us this week. As lawmakers churn toward adjournment, targeted for May 6, there is one major issue that Governor Phil Scott and the legislature need to hash out, I guess, before the end of the year. Joining me to discuss it this week, we're pleased to welcome back Jason Gibbs, Chief of Staff for the Governor, Nicole Mace, Executive Director of the Vermont School Boards Association, and Jeff Fannett, the Executive Director of the Vermont National Education Association. Vermont NEA for short. Better known as Vermont NEA. Thank you for having me. Yeah, thank you all for being here. Jason, let's start with you, since it's your administration, the governor's position here that he's been really pushing hard in the last several days, at least maybe a week. He wants a $26 million savings to come from teacher health care, and that would require changing what has historically been negotiations between local school boards and teachers' unions and turning it into a statewide negotiation with the governor's administration. Why does this make sense at this particular time in your view? A couple of thoughts. First, we've known for quite a while before the governor was elected, of course, that this moment in time was going to be upon us, and that there would be an opportunity to really rethink the way that we're capturing savings in the health insurance marketplace for teachers, for school districts, for the state, for taxpayers. So this is conceptually not a new idea. What is new is the level of specificity that the governor in concert with the Superintendents and School Boards Association has offered. As we dove into the details, went through the actual analysis, looked at the plan structures, compared what the opportunities are at the local level from a negotiations perspective to what the opportunity is at the statewide level. It became quite clear that this is a once in a generation, probably in all likelihood, a once in a lifetime opportunity to generate some savings in our education system in a way that protects employees and doesn't require them to pay more or doesn't radically reduce their level of coverage, particularly considering that those changes, coverage changes were being mandated by the Affordable Care Act signed by President Obama. So we looked at all these things and came to the conclusion that we had to act, that we need to act now as a practical matter, that the opportunity was worth whatever additional days are required to nail down the details and that's how we got to today. And just want to clarify, the Affordable Care Act is what's driving this. It's requiring changes in the health plans that are offered to teachers. So the Vermont Education Health Initiative which offers teachers plans is sort of realigning those to the Vermont Health Connect plans or more in line with the Vermont Health Connect plans. Nicole, you and the School Boards Association and school boards throughout the state are signing on to this plan as a way to achieve savings and create a less complex situation in a very complex area. Why does this make sense for school board members? Well, I think concern about property taxes has been a constant theme in this building and across the state for more than a decade. And I think that's because in Vermont, we have the second highest expenditure per student in New England and the second lowest median household income in New England. So our costs are outpacing the economic reality of our state. And so when the governor presented his budget proposal in January, which our associations did not support, we recognize that this administration, as previous administrations have been, is serious about cost containment in K-12 education. And so our association worked with the superintendent's association, brought some leaders together and said, how are we going to present some constructive opportunities for cost containment that won't do damage to education quality? And this was one of the concepts that we came to, that a statewide health insurance benefit would provide equity for all employees. So it does not matter which district you work in, you will have access to the same benefit. We'll realize aggregate savings up to $26 million, depending on what's ultimately negotiated, and would make what is now becoming an increasingly complex negotiation more simple, allowing the parties to focus on issues that really impact education quality. Jeff, this plan does have the support of many school board members and superintendents. So far, at least, it lacks support from Democratic leaders in the legislature, and it lacks the support of the Vermont NEA. What do you see as the pitfalls of this proposal? So first, I'd like to go back to something you said. Sure. The changes in the health plans is that it's not required by the Affordable Care Act. So the Affordable Care Act was passed in 2010 some seven years ago. So this is something that's not required by the ACA. So I'll start with that. So it's a change in the health plans that came about about 18 months ago, and the plans now do, the proposed plans do mirror the plans on the exchange. So to that extent, it's similar to the ACA, but it's not required by the ACA. Those new plans come online January 1. And again, I take issue with what Jason said. This is not a once-in-a-lifetime thing. I've been with Vermont NEA for 16 years as general counsel now as the executive director. We have, I think in my tenure, negotiated, this would be the third versions of new health plans that are sort of rolled out. So it's something we do. We bargain with our school boards about the plans, you know, who pays for what. We don't bargain with them about the plan. That V-high sets those plans. And so the issue is not so much the plans themselves, but who pays what and the share. And that's why the proposal is, and that takes place at the collective bargaining table. And this would not be collective bargaining. We've taken one big piece of the puzzle off the collective bargaining table and tried to require the parties to bargain over the other remaining issues, having taken a big piece off. And we see that as a problem. And fundamentally, it's just not collective bargaining anymore. Jason, let's run through some of the numbers involved here. The governor has talked about a savings, a total savings and premiums of $75 million. So how do you go from $75 million to $26 million that taxpayers might see in some fashion without harming the benefits that teachers now have? Sure, two things. Jeff's correct in that the law didn't specifically, the ACA, signed by President Obama, didn't explicitly mandate the change in plans, but it did impose a Cadillac tax, which would have dramatically increased the cost of education on the system. So there is by necessity a reason to change as a result of the ACA. Secondly, the notion that this is not still collectively bargained is just incorrect. I mean, we collectively bargain as a state with the state employees union on a range of benefits. This is just another example of how you could collectively bargain at the state level. To your question, the projected premium savings using the models that were used is about $75 million. There's about $50 million of it or so that's used to buy down the cost of the plans, the out-of-pocket cost of the plans so that employees are able to be held harmless. That leaves you with a balance of $25 to $26 million that could be recovered and used for a vast range of things. It could be used to shore up teachers' retirement. It could be used to invest in early education. It could be used to reduce the cost of college. It could be used to reduce the property tax burden. It could be used for all of those things if we're creative and willing enough to rethink the way that we're doing business. I appreciate the union's perspective on this. I may say a couple of things and not to make a case against our own idea, but the union would have, for the first time in its history here in Vermont, the opportunity to strike on a statewide basis and the opportunity to strike on a local level because a bunch of the benefits would like salary, for example, would still remain collectively bargained at the local level. That's a tool they don't have in their toolbox now. I'm not saying that it would be useful or wise for them to deploy it, but it would be a tool, nevertheless, another leverage point. I think probably the most important thing is we can do this while holding them harmless. This is an unprecedented, probably once-in-a-lifetime opportunity to reduce the cost growth in the system as a whole to rethink how we're redistributing that savings, whether it's back to the taxpayers or in other investments in our education system. Those are all important conversations that we can't have if we can't get to yes on the opportunity and the governor's committed to getting to yes. The last point I'd make is that we could be, if we're talking about how to take advantage of the opportunity as a complete system and concert with the teachers and the superintendents and the school boards, we could be laying the groundwork for even more transformative conversations, the kinds of conversations that parents and a lot of students and Vermonters without kids in the system know have to happen in order for us to be more attractive to working-age families to reverse the demographics, the fact that we're losing six workers from our workforce every day on average and three kids from our public education system every day on average. To reverse those trends, we have to really rethink the structure of our education system, the student-teacher ratio, the adult-to-teacher ratio. These are difficult conversations to have, but we have to have them. And if we can reach some kind of consensus on this opportunity, it paves the way for a productive conversation on those bigger, more transformative issues. Jeff, Jason has said, I think twice now, that it leaves teachers, it holds teachers harmless. What is the harm in this proposal for teachers throughout Vermont? A couple of things. So, again, I'll respond to Jason's. The federal excise tax is not imminent as it applies to V-high plans now. The so-called Cadillac tax. The so-called Cadillac tax. It's far, far in the future for us under our current plans. And these new plans are far from it, and they're also potentially applicable to it. So, the excise tax is not imminent and a problem to deal with. The other piece is the problem here is, first off, we're not collective bargaining. We're no longer bargaining with our employer because the state is not our employer. We typically bargain with our employer about the terms and conditions of employment, which includes salary, health benefits, but also the length of the day, recess, duty, all those sorts of things get baked into the discussion. And they're important. Those are the important issues. And so, it's important that we have the ability to talk and discuss all of the issues at the bargaining table and not take a really big one off the table. How do you get to yes on other issues when they are so much more magnified? And frankly, with regard to health insurance in this proposal, I don't know how you get to yes when you just have two-positional bargaining. You know, the governor's office saying X and the teacher saying Y. I don't know how you move. There's no ability to sort of negotiate your way out of that box. So, I think it's fundamentally problematic in that it's not collective bargaining. That's not what we do. We've been doing this for a long time. Again, this is not once in a lifetime. We've had several planned variations over the years. In my tenure, we can negotiate this and we are negotiating this. There are schools and educators now who have settled for next year. They're working through it and they're achieving whatever savings they think is necessary at the local level while still maintaining the high-quality schools that we do have. I do want to follow up, Jason, on this point of you compared teachers to state employees. State employees do, in fact, work directly for the state. Teachers do not. They work for the local school boards and local districts. So, in that sense, isn't it a slight chipping away of the collective bargaining rights of teachers in Vermont? No, they would still maintain the right to collectively bargain those benefits. It would be with the state as a whole. But not with their direct employer. As Nicole points out, at this point, it's really a matter of semantics. Isn't it? We have a statewide property tax. We have a statewide education fund. Our employer, the employer of a teacher, is really the taxpayer at the end of the day because they're the people paying the bill. Now, I understand the contractual relationship between a district and a teacher, but let's think about this from the point of view of ordinary Romaners who are buckling under the burden of a crisis of affordability. This is a way for us to reduce the scope of the growth in the cost of the system in a way that doesn't impact our ability to deliver service to kids or the out-of-pocket costs to the teachers themselves. It's truly a win-win-win. Now, I understand why Jeff's obligated to take the position that he is and believes in the position that he does, but it doesn't necessarily mean that it's the right way for us to go for the future. That's the case that legislators are hearing right now. I mean, are we going to continue to do things the way we've always done them and keep getting what we've been getting? Are we going to look at taking a different path that's intentionally structured in a way that respects the role of teachers, that respects the potential for there to be higher costs and make sure for them and make sure that there isn't and recognizes that we can generate a bunch of... I mean, we're talking about the potential for $100 million over five years. I mean, imagine what you could do in education alone. I mean, let alone the economic impacts of $100 million in tax relief. I mean, this is a real issue and it transcends the divide and conquer strategy of a union, which is to maintain as many of these bargaining opportunities at the local level as they can so that they can pit one district against another and create leverage opportunities for themselves in those local negotiating conversations. I'd also say this, I was on a school board for five years. Negotiations are wildly complex and beyond this on healthcare alone and beyond the scope of volunteer part-time board members who are up against very skilled professionals and it may have worked for a while but it's not working as well as it could now on the issue of healthcare but that's even beside the point. The point is we've got an opportunity that won't exist next year and we either take it or we don't and if we don't take it, we're leaving five years, $100 million of savings on the table and this governor's not willing to accept that. I really want to have Nicole jump in here but I do want to follow up on a couple of things. It might be in the union's best interest to maintain local negotiations but it's certainly in the governor's best interest to maintain some sort of statewide negotiation and if you move healthcare to a statewide negotiation what's to stop you from coming back next year or the next year after that and seeking an entire statewide teacher contract that deals with salary, working conditions, other things? When I asked the governor at his press conference are you committing to never seeking a statewide contract? He said, no, I'm not saying that. I mean, teachers in the union should have something to fear it seems that this is just the first step in trying to dismantle the current system. I'm not sure that there's anything to fear from a conversation about what the best way to deliver an efficient, cost-effective, high-quality education to our kids is and that's the bottom line here. That's the end goal. We all share. It's not about employees. It's about kids and it's also about making sure that we have a system that's as efficient as possible so that we know we're treating teachers with the dignity and respect that they deserve from a compensation perspective and a professional perspective but also that we're not spending money in a system that doesn't need to be spent on overhead costs and instead could be redirected to actual academic opportunities. We need to transform our education system to something that is the most appealing in the country in order to attract more working families to Vermont to bring more entrepreneurial activity to Vermont to lift people out of poverty. I mean, this governor believes education can be our most valuable economic development tool but we've got to be willing to rethink the way that we're doing business and that includes being courageous enough to ask the question, should we have a statewide contract? But that's not what this is about. This is about a statewide healthcare benefit that levels the playing field across all districts and has the potential to save $100 million over five years. It seems like a no-brainer to us. We're going to continue to make the case for it. But at the same time, you're still leaving the door open for a much broader overhaul of the relationship between communities, teachers, and the state. We're not advocating for a statewide contract at this time. What we're saying is that it is a conversation that the state should have because our ultimate goal is innovation in education. And if the ultimate conclusion is that a statewide contract, if Nicole and her members and the superintendents and the teachers all agree, for example, that's not the best path to innovation and better outcomes in building the best education system in the country that's a magnet to working families, then we won't do it. But my point is, and the governor's point in the press conference was like, hey, why reject the conversation? But that's not what this discussion's about. This discussion's about an opportunity to save $100 million over five years that can be reinvested in a range of ways. We're just not going to leave it on the table. I don't understand, but I mean, here's our call. Sorry. Yeah, I have to do that. Let me get Jeff and then we'll call right to you. The conversation took place without us. And I was called to a meeting and found out I was not at the table, I was on the menu and that's what it feels like. And so I do fundamentally, we do have concerns about the going forward with this. We're happy to have discussions about healthcare and healthcare reform. We've been working at it for decades. So the governor wants to join us in that effort. We welcome him at the table. We don't want to statewide teacher strike, which is what the governor is now proposing or suggesting should happen. This is not, fundamentally, this is not labor negotiations. That's what the proposal is. It's anti-labor. And that's why we are so adamant to oppose this. There was a point in time. Hang on. There was a point in time just recently within the last few legislative sessions where the NEA took the opposite position on the issue of statewide healthcare benefits. And that was in the context of single payer. They were all too eager to support a benefit package that was both constructed and administered by state government at the time that we were talking about single payer. And now when we're talking about a range of options through the healthcare exchange, their position is different. So that's an inconsistency that I can't reconcile in my mind, but maybe the debate will fair it out. That might be a whole other show. Nicole. Right, right. I do think that education in Vermont is unique in that we have statewide interest because we do have a statewide property tax and a statewide system of education and a local interest. And so our organization is interested in identifying where the appropriate place for each party to participate in the system is. And we believe that this is an appropriate role for the state to play. Again, for the reasons I cited earlier. I do want to speak to the concept of the savings that could potentially be realized through local negotiations. I surveyed business managers last week to find out how many people booked savings for the healthcare transition in this year's budgets. Just a handful did because there was a lot of uncertainty around the outcome of these negotiations. So the notion that somehow up to $26 million is going to be realized and returned to taxpayers this year simply isn't true because the money has already been booked in the budgets. The governor's proposal has a mechanism to recapture those savings by saying the state's only going to pay you districts for the cost of the benefit and we will keep the differential between the actual cost and the budgeted cost. So I think that's important to realize that these savings are not going to be realized organically at the level. The savings are mythical, really. I mean, they've got to come from someplace. There are expenditures that take place in healthcare. And by just changing who pays what doesn't change the fact that people need to pay. And so what the VHI, one of the plan administrators spoke yesterday in House Education and said that they're hoping for a change in behavior by basing these new plans where people have more out-of-pocket expenses. So they're banking on the savings coming from people using less healthcare and the premise upon which that is based I fundamentally disagree with. It means that people are using healthcare now unnecessarily and don't think that's the case in Vermont. We are prudent users of healthcare, good educators and we like our education. We like our education system. It's locally grown. As Jason pointed out, school board member, school board. And that's important that we have these people. And finally, with regard to being outgun as happened at the governor's press conference the other day, frankly, we have seven teachers who train our teachers, bus drivers, support staff to bargain. Our model is we train our educators to bargain with school board members. It's nothing fancy. And the people who do that on my staff are seven educators, former teachers. And so they're not hired lawyers. Most school boards come with a lawyer, superintendent, a business manager, and perhaps a consultant. We come with teachers. And so... I do want to ask you there. I mean, there are professional lawyers, staff, other people who do assist school boards. And I would have assumed that the school board's association provides some resources to local districts in these negotiations. We provide information and training. We don't sit at the table with... But they do have lawyers that do that. Some districts have lawyers at the table. Many have a lawyer that they consult with before they go negotiate. Some aren't working with lawyers at all. So there's a wide range. So far this year, only seven contracts have settled. 21 are at impasse. That means that 21 supervisory unions are going to be going through a pretty complex and expensive mediation and fact-finding process which will result in recommendations that the parties then need to contend with. So I'm concerned not only in assuring a common benefit statewide, realizing savings where there are savings to be had, but also avoiding a potential crisis this fall when you have people that are scrambling to try to settle contracts where the parties are very far apart and an open enrollment period for these plans is coming to a close. The governor's $26 million savings is contingent on 80-20 split, meaning teachers pay 20% of the premiums, teachers pay 80% of those seven districts that have reached an agreement. What's the breakdown been like in terms of the premium share? So it's all over the place. It's closer to 80-20. Some are benchmarked at the gold CDHP plan. Some are 80-20 of any plan. So it's really again when I talk about equity for employees, when you look at the variety of ways that districts have come to an agreement, seven of them, on how to approach healthcare. As an employee if I were to know that by changing my employer I may move from a system where I have a health savings account and I have this benefit to five miles down the road a different district where I don't have my HSA anymore or you know so it's literally all over the map in those seven. I do think the $26 million isn't contingent on an 80-20 split because there's a lot of decision points that can be made at the bargaining table around costs and who covers which costs and it doesn't necessarily mean an 80-20 on premium it could be more employer costs at the premium and less than the out-of-pocket cost. So there's really a lot that needs to be settled. Well this is one of those weeks when I wish we had another half hour to discuss the issue unfortunately we are out of time for this week but we will be following along in the next week or two as this decision really is decided among lawmakers and the administration. So my thanks to all three of you for joining us this week and holding forth here. Thanks Neil. Thanks and we'll see you again next week.