 Education Committee in the Vermont House of Representatives. It's May 27th and we are this morning taking a look at age 959, a bill that was passed by Ways and Means yesterday, and this is the bill that addresses the statewide property tax, the yield, and basically funding education through the head fund property tax. And with us today, we have Representative Scott Beck, as well as Abby Shepard from Ledge Council. Shall we have Abby go first, Scott, or do you want to, who do you think would be better going first? I'll go first, and then if there's any, if we need to nitpick the language, Abby can certainly hop in, but it's pretty straightforward. So that makes sense, because we want to understand a little bit of your thinking that went into this as well. Yeah, I'll just do the nuts and bolts of the bill, which really learned many to it, and then go into a little bit of the thought process. So what I think is going to happen today is this committee bill will be introduced on the floor, and then it will be called up for immediate action and second reading. So basically the bill does, I guess, four things. It sets the yields and the non-homestead rate for FY 21, and those yields are, the property yield is 10,998, and the income yield is 13,535, with a non-homestead rate of a buck 62,8, and those are the numbers that voters were expecting when they passed those budgets back in March pre-COVID. And then it also acknowledges that because of those rates and the decay of the consumption taxes in the fourth quarter of FY 20 and a likely reduction in consumption taxes in FY 21, that forces a deficit, and it authorizes the Education Fund to enter into deficit in FY 21, and then it prescribes a number of things that can be used to reduce that deficit. They really are in no particular order, with the exception of one. Number one is the usage of federal funds to reduce that deficit to the greatest extent possible. And just to kind of fast forward a little bit, that deficit right now is projected by JFO in FY 21 to be $156 million with a full reserve. Also, to deal with that deficit, the application of reversions, the drawing down of the stabilization reserve if we chose to do that, other sources of revenue, the reduction of costs to the Education Fund, borrowing pursuant to section three of this act, and that would be interfund loans in section three, and then any other source of funding, including the appropriations from the general fund, or other funds. So those are all things that could be used to reduce that $156 million deficit. Section three authorizes the treasurer to use the interfund loans to deal with the deficit, and it also establishes a date of June 30, 2026, as the date when any borrowing will have to be repaid. Also in section four, there are three compensations for overpayment for previous years. The Thetford school district is to receive $148,775. The town of Barnard is to receive $48,081, 57 cents, and the Windsor Central Unified Union School District is to receive $275,000 in 462 and 82 for an overpayment. And this effect, section five is the effective date July 1, 2020. How this all plays out on the Education Fund outlook, if you're looking at that, or have access to it. Yes, Avery, could you could you pull that up? Okay, great. She's going to put on the screen. Thanks, Avery. So there, that's the language. Let's get, let's, do we have the updated and find out luck with these tax rates in there? I don't know. I'll just need to pull that from the website just one moment. Okay, thank you. It's on houseways and means from yesterday if you don't have it. Okay, thank you. Just while we're looking, Scott, that section four is just basically accounting errors that happen for those school districts between the ages. That's right. Yeah, they were for a variety of reasons. I think a lot of it had to do with excess spending threshold. They overpaid. Now we're making them whole. That's right. We have a couple or three of those every year. Yeah, it's just a part of the auditing and accounting process. Okay. Thank you, Avery. So if you'll look, the big numbers to hit on are at the top line C, E and F. That's the non-homes to property tax rate of a buck 62, eight. And then the property and the income yield, which are 10,998 and 13,535. And again, those are where those numbers come from is those were the projected numbers in March. After people voted, after the majority of districts voted their budgets, and we thought we had healthy consumption taxes because we were in a pre-COVID environment. So those numbers reflect the budget decisions that people made and what they believe the tax implications of those votes were going to be. So we thought it was fair to hold them to that and not punish property taxpayers for the COVID situation. Okay. Just a couple of clarifying a couple of questions, but just to clarify, just to remind folks, when the yield goes up, that actually means that it's a better impact on the tax rate. Tax rates go down, right? Yeah. The tax rates go in the opposite direction. Right. So and then the other important numbers to see here, if you look at line 11, which is the education payment, that's the payment that goes out to school districts to cover what their grants and reserves and contributions don't cover. It was projected to be 1489.5. It's 1489.5. So we're not we're not shorting the districts any money. We're giving them what their voters asked for, what they said they needed. Can I just stop you from one quick second? Yeah. Sometimes going through this, their questions. I'm sorry, that Austin has a question. Yep. Hold on one sec. Let me see how do I move myself. You're on mute. Amaya, can you hear me? Yes. Okay. This may be jumping ahead a little bit, but I'm and you can wait to answer it. I'm just wondering how does the deficit, does the deficit spending impact the calculation for the property tax yields, like in 22, 23, 24 and 25? Yes, you are jumping ahead, but I'll get to that in just a second. Okay. Thanks. Okay. So you'll notice if you come down the sheet a little bit, in line 26 in the center column, you'll notice that it's there's a 4.6 in red parentheses. Okay. And what that indicates that is that fourth quarter, fourth quarter consumption taxes and even a little bit of first quarter, a third quarter just fell off the table. And so we were projecting, we thought we'd be about 30, you know, a full reserve balanced and the reduction in consumption taxes ate up the entire reserve and then another 4.6 million dollars. And so we're in, you know, we're in deficit for FY 20. For 21, we're filling the reserve back up to its full statutory 5%, which is 38 million dollars. And we're doing that. And in addition, having the consumption taxes decaying that forces a deficit of 156 million dollars. And that is on line 31. Okay. So kind of getting to Sarita's question here. So how all this, you know, plays out in the long run is along the short term is that obviously it's my committee's position that we want to reduce that 156 as much as we possibly can with federal dollars, either CARES Act money freeing up or some sort of subsequent legislation, HEROES Act or something else if it were to get through. We would, you know, hope that we could work with the Appropriations Committee to make sure that those dollars as much as possible, reduce the 156 million or eliminate it. That is preferred. Okay. Right now as we stand here, no federal dollars have been appropriated to the Education Fund. Okay. So how does that, you know, play out down the road? Well, what's going to happen is the, if we weren't able to get any federal dollars or even if we got some, whatever that, whatever line 31 and the third column is, okay, that money is going to have to be borrowed from somewhere. Whether it's Interfund or out on the market, it's going to have to come from somewhere. And those people are going to want it back. And the Treasurer has indicated that five years is her comfort level right now of getting it returned. Okay. So what happens in so it's entirely possible in FY 22 and 23 and 24 and 25 that in 26 that the Education Fund is going to have to pay back that 100 that whatever is left on the bottom line there, 156 or some other number, that by its very nature will force property, that will be something that will be borne by the property taxpayers. There's nowhere else for it to go unless money comes into the Ed Fund from outside the Education Fund to repay those dollars. Okay. So basically as we sit here right now, not having identified those other sources that could pay back that $156 million by definition, it will fall to the property taxpayers in those years. Doing the math and that will impact yields, that will force yields down. But doing the math quickly on the principal alone that's about was it $31.32 million? If we weren't able to reduce it with any federal funds, yes. And what is that equal approximately? It's about three pennies. About three pennies on the tax rate over the next three and a half. Based on the principle, it doesn't include the interest. But better than perhaps 23 cents in one year. Right. Which would give districts some time to work through and plan. Yeah. I mean, it's basically a matter of do you want to swallow $156 million in one year or do you want to swallow it in five? Okay. Thank you. Questions? I for one will say I appreciate very much you searching for ways to separate the COVID challenge from the property tax rate in a single year. I think that I really do appreciate that work. I see Larry Coupoli and then Dylan G. Matista. Hey, Scott. Thank you. Any conversation with regard to recessionary issues exceeding this period of time when addressing this bill in terms of, you know, other sources of revenue, et cetera? I mean, had that conversation come up with, you know, other than raising property taxes, how do we reduce this $156 million alone if in fact we continue to be in recession? So you're talking about other sources of revenue to the education fund? Should there not be anticipated revenue? Well, I mean, there is anticipated revenue. We, you know, all of our consumption taxes are still in place and we will get revenue from them, although it won't be as robust as we had expected pre-COVID. But there is no move afoot or there's nothing in this bill to somehow create another source of revenue or expand an existing source of revenue to pour more non-property tax dollars into the education fund. Other than what's already there. That's right. Yeah. Okay. Thank you. See, Mark, did you want to respond in there before we go to Dylan? I just wanted to point out that I got an email from Bill McGill a few minutes ago and the bill is going to be taken up on Friday. So you do have a little bit of time on the floor. Yeah. Dylan? Yeah, just a question and this may actually be more for Mark, but Scott, I'm going to put it to you because you've been taking testimony here. So the education fund is a self-balancing fund each year. It's put back into balance based upon the decisions of lawmakers and what we know to be true of revenues and then we rebalance it as needed based upon the spending as the cycle moves forward. Are there any recent examples within this education finance construct of having a deficit within the education fund? Because I'm looking at it and I'm not comfortable or uncomfortable. It just appears to be a pretty significant departure from a self-contained, self-balancing fund. Yeah. I mean, it is a significant departure. I mean, it's not during my time have we ever, we've, you know, it's balanced every year. Mark may have some knowledge going back to the great recession 2008-2009. I know that there were federal funds used to balance the fund in some of those years, but I don't know if the fund actually ended the year in deficit. Yeah. If I could just jump in on that. I don't think there's any precedent for us having an actual deficit in the fund. There have been some years when the 5% reserve wasn't fully funded, but we've never used up all of the reserve and then fallen into a deficit. No. So just a quick follow-up then because that's the other piece I'm wondering is, and I'm just trying to process this through. I don't have these are nothing other than first impressions, but if you have at the lower part of the actual Ed fund balance sheet, you have things like reserves and so forth. What purpose is there to have an education fund reserve other than the statutory construct if you are now allowing a deficit to sit on the bottom line? I understand that there's a construct for repayment, but at a certain point it appropriating money to a reserve if you have an outstanding loan and balance that you need to pay back to me seems somewhat challenging. I can't wrap my head around that. Yeah. You're getting into financial philosophy right now Dylan and one philosophy is if you have a reserve, burn it, use it. The other philosophy is if you have a reserve use it as collateral to borrow and hold on your cash and you'll find that that's a very you know businesses do that all the time. When times are rough you hang on to as much cash as you can because you don't know what the future is going to look like and we had a long conversation with the treasurer and basically whether you take it from inner fund loan or you take it from the reserve fund you are borrowing it and you will have to pay it back down the road. It makes no difference to the property taxpayer down the road whether you're filling up the inner fund loan or whether you're filling up the education fund reserve. So the conversation with the treasurer was that you know basically hold on your cash because we don't know what f by 22 is necessarily going to look like. We don't know what f by 23 is going to look like. We don't know what this virus is going to do down the road or how it's going to affect our revenues and so you know that's kind of that's a strategy. When you don't know what's coming up you better hold on your cash. Yeah and so just in response to that I would say that's really helpful context to get as we think this through because of course the education fund sits on its own outside of the general fund and we all I think have pretty strong ideas of what it is or isn't but of course we're in an unprecedented moment and so I appreciate the work of the committee to try to identify a way within the fund to keep us on stable ground and then the construct of repayment to me sounds like belt and suspenders that we will do this and then we'll have to make decisions in the future based upon the unknowns if we need to raise additional revenue or add sources into the fund to pay for it. So it's a pretty elegant idea. I'm interested and intrigued to learn more. Thanks. Sarita. Yes can you hear me? I can. Yes we can hear you Sarita. Yeah okay yeah thank you. This may be for Mark. I'm just wondering about any further consolidations of school districts and any future savings that might occur because of those consolidations and I'm just going to throw this out there as Larry will like this as a pot you know just to think outside the box a little if there were more consolidations would that help out with this situation? Yeah I'm not sure how I can answer that question. It goes into actually both directions sometimes consolidating in the short term results in higher spending rather than lower spending but we don't have any I don't think we've done any analysis and there's been no study done as to whether or not the consolidations that we've done to this point in time how much money that might have saved. So I can't really answer your question. Yeah I think the way I would answer that is is that the the virus and its impact on consumption taxes doesn't care whether districts consolidate it or not. Yeah I just thought it would lower spending so I wasn't looking on the revenue side. Yeah it was never really a reducing spending bill. Oh it was and then we tore something out of it but Mark remembers those battles. Mark did you have something else you wanted to add? No. I do believe that there is going to be an amendment Scott Beck. I just happened to see on email that you were talking about. There is I just got a text from Janet and there is an amendment but I think it's nobody's seen any language. She's got language and it is there and it does have to do with the weighting study. So my first Zoom amendment that's awesome. Yeah thank you so committee let's shall we have Abby just go through it make sure we understand the points. Good morning. So I think that's Representative Beck just really walked you through all of the major points. The only small legal point that I would add is in the discussion around the deficit. Vermont's constitution does not require a balanced budget so there is notwithstanding language within this to make it absolutely clear it's the general assembly's intent to allow a deficit but it's not entirely clear that there is any constitutional prohibition against running a deficit but as Mark said in the past I believe the general fund transfer has helped to balance the Ed fund. So that's the main point I wish to make. Really it's a fairly short bill right now there's a law packed in I think Representative Beck pointed out that for any deficit that is incurred currently this language requires it to be repaid by the end of 2026 June 30th sorry the end of the fiscal year. Okay and we don't have that that stands with the general fund as well we don't have any constitutional amendment about balancing our deficit spending or anything in our general fund as well. Correct or one of the few states that doesn't require a balanced budget. That I would have to check on that I'm trying to remember Mark or Jim we had looked at this just trying to remember what I think that has a provision requiring some balancing is that correct Jim sorry I'm just trying to look up an email chain that we had discussed. I've been typing this amendment and not listening closely. Yeah I know I'm doing the same thing. So it's okay I was I was just referencing the general fund in the comparison general fund and the Ed fund but it's not essential to what how we respond to this. I will follow up with you. We had looked at that I just don't know off the top of my head I think it's a slightly different treatment. Yeah so there aren't any other questions can I just take a straw poll on support for the committee's work straw vote that is and perhaps we can do it by hand raising. So if you are in virtual hands or or literal hand virtual hands if you are in support can I can I ask one question I'm sorry to interrupt just curious what so was there a vote in Ways and Means I might have missed it. The vote in Ways and Means was 902. Okay I guess I'd just like to make a comment if I could just as a as a as a school board member this proposal is allowing school districts to start this next school year with one piece of major case so much going on that the ability to start not under the threat of a 22 cent tax increase is going to be incredibly beneficial and I think it's important to note that I just had a school board meeting last night and without my prompting the discussion really fell to knowledge that this deficit is is looming out there and that in FY 21 meeting this next school year we have a budget but we're going to need to save as much money as possible during that to build up our reserves to prepare for what will be a very challenging FY 22. The budget work for that will begin October November December so this gives some some very needed breathing room but it doesn't ignore what we're going to be facing in the future. Thank you and I think also it will provide some release for voters in the 19 districts that when they're going to vote on their school budgets understand that they're not looking at a 22 cent average tax increase. Dylan did you have something else? Yeah just the the only other piece here because I've been trying to figure out what this construct would look like as we set up for next year and I think Peter identifies something really important is providing a signal to the field that there will be stability and I think that our messages from Montpelier are extremely important right now and I assume this one will be broadcast but also within the fund that we are dealing with a really extraordinary situation where we may in fact be able to use coronavirus relief funds if we can determine that they are appropriate to deal with this structure and this construct that we're setting up so that it is not something we are dealing with in future years for the full term so I think that the intent language is particularly helpful declaring our intent to retire this loan but also to keep the construct as is and I think longer term just as we move forward it's not as though education finance reform ever goes away so we'll continue to have those conversations but for this moment providing certainty within the current construct to me is the most important thing and so I'm prepared to support this proposal when we do the straw vote. Thank you anybody else? I'm music. This is Caleb. Yes, please. Cool. Yeah I just wanted to comment similarly that well Echo with Peter and Dylan said but just to I see this as providing certainty for the mechanisms that govern education finance and as Peter says it gives certainty to some districts but it doesn't guarantee I would say this is more of an opportunity than an opportunity for a further solution and I hope that equity just you know around the weighting study and things like that as it pertains to the amendment today which I'm not fully obviously familiar with but I'm aware that that conversation is one of the people want to have as we kind of talk about this big crazy change the ed fund where it's going to be unbalanced but so just I guess to emphasize that this is giving us the opportunity to say through this mechanism we're holding taxpayers harmless but to bear in mind that if we don't find another solution it doesn't hold those same taxpayers harmless from that finance or other things even though that might be obviously way less than the 22% hit in one year which would be just impossible but I just hope that we keep working towards the next part of this solution and not feel like this important certainty that we're giving I hope when we pass this as the house is by any means like the last step I think we should use the corona relief funds or at least borrow against them regardless of what is clearly authorized but you know that's probably that's probably just me but I've been saying that a school board meeting so I'll also say it here I mean I think that those funds have to be part of the solution and thank you for hearing me out we certainly know that the news from Washington changes and the way that we interpret it changes as we move forward we consider where we were two months ago where we are now it just the understanding and awareness is completely different Sarita yes I also just want to say that not only does it buy a certainty but it also buys us time and when I listen in on appropriations in ways and means you know it seems like that's a theme that's running through at least the money committees is buying time so that they can gather more information and just kind of make more informed you know decisions about the future so I think this this bill just also buys us time it's also a solution a short-term solution but it also buys us time to see what's coming federally and kind of seeing how things evolve and we will all be back in August we'll have different information by that as well yep anybody else vice chair you have anything to add I think we're good okay so we don't have possession of the bills so I'm not going to take a formal vote but if we could take a hand raising vote would be great so all those in favor that's the support the bill before us could you raise your hands I should probably count myself so I have eight of us I have Sarita Peter Chris Casey Larry Dylan Jay and myself supporting this um okay let's take your hands down Lynn was waving Lynn was waving I'm counting you okay so take those down and Kathleen is texting furiously yes as well okay okay good we should just do this as a roll call shouldn't we remember the easier so um why didn't we just just roll call this it's probably easier um so Peter and Casey and Jay can you take your hands down Kate I'm gonna zip over the ways and means but I appreciate it I think I think you should it looks like they've she's taken of all the bills to take off the wall s46 is a prize is that in your committee now or is that that's the way I heard it might be the basis for language for an amendment but I'm struggling to see how it's made so I think there's I'm thinking I'm missing something yeah so it's what it is I'm looking at it what it is this is the ethnic studies bill but she's put the waiting study on on the bill so I thought I thought that was in our committee so I don't know okay thank you thank you very much all those opposed I see no one opposed um I don't know if I got I don't know if I got Caleb Caleb what are you in support Caleb and Chris I think I'm missing your votes uh yeah this is Caleb you're very good I haven't been on the phone much before for these meetings yeah I'm a little clumsy with my with my star six and um so yeah yeah I mean I know this isn't an official vote uh yeah it's a straw poll yeah for the purposes of the straw poll yeah I'm all for it thanks for okay all right is there anybody that I've missed so I I've got yes it says Caleb Larry Lynn Casey Chris I don't know if I have yours yes okay Dylan Jay Kathleen Peter Sarita so I think that's that's and myself and none opposed and Kathleen I also can't hear so I it looks like we're good we support this it would be a good idea to take a look at the bill that we're gonna have to let the other folks know because they're gonna I I would almost encourage you encourage us all to go over and just observe what's happening in ways and means right now to see that being presented um and if we need to speak to that this is the this is the waiting study that was part of Act 173 um which brought us the report from Tammy Colby the senate uh actually started taking that up I think it stayed there and the question as as you may remember this is the way that the the waiting study is basically a zero sum game where all it really does is is change tax rates um the concern going forward for some of us from the waiting study is it doesn't necessarily mean that the money is going to be distributed appropriately to those because they're you know there's poverty our our districts with high poverty simply going to go for the property tax or are they actually going to be investing it in children with with suffering from poverty so um there's I know that there's some questions in that that we have on that whether it's better to address these problems through a waiting study as we did with special ed or is it better to actually consider it as forms of grants which would ultimately affect your tax rate but would also um would direct money to address the issues for which the waiting uh was was addressed and some of the differences is in terms of if you look at why we moved to the waiting to uh to a census based in Act 173 the amount of detail that you need to account for currently in the um in the current formula where you have to provide evidence for services which involves a lot of beam counting um and to to to be reimbursed is very different from just saying we have x number of children who are living in poverty um so at any rate I think I am going to run over and sit outside the ways and means room and hear what they have to say and we are on the floor um 11 o'clock yeah oh I should probably also just speak to did Larry did we speak to the committee at all about uh our conversation no we did not no okay but no that's I think you updated us about your conversation yesterday with with uh Senator Baruch and yeah yeah yeah that we are that we're just waiting till August we're gonna wait so through uh yes to see how to see how the votes come through okay so I guess we're good yeah um okay and um I think part of the reason for that ultimately has to do with the fact that there's a significantly more progress at the local level we have a lot more progress now than we did two months ago when we were actually looking at a need for the legislature to intervene and because everybody is planning to vote in June that perhaps the best thing to do is to let the let the local process happen rather than have the legislature interfere so it's not a win-lose I think ultimately personally I think it's probably our better solution and we will we'll meet again in in we'll know at the end of the month how many have passed I'm still waiting to hear about Rivendell and still don't have anything Rivendell voted yesterday and I don't have any news on that yet so we'll be watching okay do you know how they voted I um I think they were Australian ballot meaning but by mail uh yeah okay exactly right um good question I'm not sure okay yeah but we're doing what is what is the Essex vote uh next Tuesday so I'll be tabulating ballots and you know just just in an update I know I talked about stuffing ballots um we put many many thousands into the mail and I haven't heard any complaints yet so that was all the justices of the piece and our clerk's really incredible effort so we'll see how Tuesday goes a lot of fraud out there troublemaker only only in the nursing homes okay um thank you all so much I'll see you on the floor and appreciate appreciate your attendance okay just I think I may have missed it this is coming on Friday though the yield bill will be Friday not today the yield bill will be Friday so there will be time for us to also hear hear more about the um amendment so I hope there may be I may be getting in touch with you to meet right before on Friday unless Thursday is easier for people I don't know who would rather meet on a Thursday than on a um than on a uh Friday morning I would prefer Friday morning you prefer Friday morning there's one make sure you prefer Friday morning all right that's enough so it's I think it's nine o'clock Friday morning um that we'll probably meet and hear that um it's so and um by the way I'm just seeing Dylan you had some thoughts about um hearing about um graduation ceremonies is that correct well I I mean I I think it's a delicate balance because uh plans are in process for these but I have heard from some parents who have said it appears that some of the agency guidance is different from the large group gathering guidance that is applied more broadly statewide by the Department of Health so I don't want to stir the pot here but I do think it's a question that we will be hearing more about I'm not sure if it's the right time for us to take testimony or not but just wanted to make the suggestion it is a topic I've heard a little more about in recent days on Friday we have uh we're going to be hearing uh more about the teacher licensing bill that is on its way to government operations um just to clarify that and Jim you I think you were I was going to ask you to look in look into some of the information that came from questions uh related to um licensing as well I think criminal I heard that conversation sure we're but I'm not sure exactly what questions you want answered so if you could just text me or yeah you know that would help me to prepare I think it was mainly Kathleen and Serita so Kathleen and Serita if anybody has questions about a better understanding about um criminal background checks or something that might fall more under um under most of chapter on criminal background checks which I can run through with you on Friday yeah so please anybody feel free to text text Jim and me if you have questions related related to that so that we can address that and Serita yeah um yeah I just wanted to say my question was in terms Jim of substantiated when they were looking at evidence um in the predetermination in the first round of a applicant applying um when it's substantiated is that does that go through a court or how that that was the question I had in terms of not answering right now if we could put that forward no but I just wanted him to know that's what my question was okay great and Kate I was wondering about the schedule of the other bill um that the healthcare negotiations bill when they're taking testimony do you know it can you just just should it email to all of us if in case we want to follow or have we asked someone to sit in that committee yet no we haven't okay is there someone that like would like to uh participate I'm going to follow it no matter what so I'd be happy to be part of that but if other if I'm happy to just watch it on YouTube if other folks would like to be our sit in representative okay thank you so much um Peter appreciate it and thank you Serita yesterday for sitting in with government operations okay so I guess I'm going to be probably we're all going to be watching I think I'll end up just watching the YouTube on um later on on the uh civilian amendment what time are they taking that up I think right now okay I thought it was right now maybe and we're on the floor at what time we're on the floor 11 11 11 okay okay time to go take a quick walk see you all at 11