 Hello, good to see you all. Senator, you're now live. Thank you. We are now live. Okay. This is Senate Finance. And we are continuing our work kind of trying to figure out what is happening with the Ed fund, what our alternatives are. And then at the end of the day, we are going to take a look at that Interfund borrowing. I'm not quite sure how that's going to make it on the Senate calendar, if the Senate is going to meet tomorrow. But it is something that has a timeline for the treasurer to keep us in balance. So we're going to start out with Mark Peralta and Mark, you're going to give us some more updates and projections and your name came up when we were talking to the towns and their request that we suspend the 8% penalty if they don't turn in all their property tax and said that you could help us understand the impact. Okay. Okay. That's right. I'm Mark Peralta from the Joint Biscal Office. I thought I would start out by first reminding you where we think we are in FY20. Then I can give you some additional information on some work we've done looking forward into FY21. And then I can address VLCT's proposal to have the state borrow to cover any revenue shortfalls next year. So I think we've already talked about 2020 in here a little bit. So just to reiterate, we think that because of the $89 million short fall in non-property tax revenues coming into the Education Fund in 2020 below the January forecast that we're looking at a $39.5 million shortfall. And that is a shortfall that exists after we've depleted the FY, the reserve that we expected, the surplus that we expected to have coming forward, plus the entire stabilization reserve. Still $39.5 million short that would be carried forward into FY21. And is that assuming that all the property taxes that are owed in May more or less get paid? Yes. That assumes that all of the property tax revenues that we've anticipated for FY20 come in. That's a much smaller issue. It's an issue, but it's a much smaller issue in FY20 because we're so far into the fiscal year. There isn't that much money left outstanding to collect. So we're not interested. It'll be an issue for towns, but in terms of the Education Fund itself, it's probably not a huge issue given the size of the other numbers we're looking at. But yes, that $39.5 million assumption assumes all of the education tax money comes in. Okay. Okay. And I think we're pretty sure it won't. But now my understanding is that the state treasurer, Beth Pierce, has indicated that the state has a cash position that is good enough to allow for us to get through FY2020. So bills are going to get paid for FY2020, even though that deficit may be carried forward in FY21. Bills will get paid this year. Okay. Okay. It also assumes that all of the money that was deferred for the meals and rooms tax and the sales and use tax comes in in FY20. Okay. And I think the administration has proposed allowing us to count any money that comes in through the month of July before those deferred taxes to be counted in FY20. So with all those assumptions in place, FY2020 looks like we're down $39.5 million. Okay. So if when the rooms and meals and sales tax get paid July 15th, that's going to be used to cover deficit in 2020 that ended July 1st. And assuming that they all get paid, we still have a $39 million deficit. Correct. Okay. Okay. That's 2020. Now going forward. The best case scenario is the treasurer will cover our debts this year, but that if everything comes in as it should, as owed, which is highly unlikely, we still have a $39.5 million deficit. Right. And that's because the Interfund borrowing would need to be repaid. Right. It's money that's borrowed from another fund. It's going to go back at some point. So it's to get us through the year, but it doesn't address the fall. Okay. So then going looking forward to FY21, first of all, I got to tell you that we do not have a reliable estimate yet for non-property tax monies that will come in in 2021 compared to the January forecast. So for the numbers I'm talking about, I have assumed that we would collect 80% of the non-property tax revenues that we were anticipating in the January forecast. Okay. 90%. That's basically sales tax. It's mostly sales tax, but it's also meals and room stacks. Okay. So let's see. So I've assumed that that that loss, that loss amounts to about $114 million. Okay. In addition to that, we would have the $39.5 million we've talked about in FY20 coming forward, assuming that you want to fill the reserve in the education fund in FY21, back to the 5% statutory amount, that would be another $38 million. And school districts have already approved an increase in education spending of about $74 million. So we're talking about a big, big hole in FY20. Based on those assumptions that I just gave you, the hole in the education fund next year would be, so I'm not messing up, about $185 or $186 million. So it's huge. Yep. That's a big hole. That's a big hole. And schools are getting that we could work a deal and they're getting somewhere around $30 million. Okay. That's right. So I haven't discussed at all the, it's about, it was a $30 million in the ESEA money coming from the feds. Yeah. The money is going to bypass the education fund, go to the agency and then directly out to supervisor unions. The department gets to keep about 10% for administration and emergency. So there'll be $27 million available to school districts from that money. I haven't included that at all in this analysis because I don't know when it will be received. I don't know if it's going to be used up for COVID-19 related expenses that are showing up now in this last quarter of the year, but that money is available, not reflected in here. So that's a piece of good news, but I haven't covered that. Yeah. This $30 million, we don't know how it's, yeah, where it's going, how it's going to the schools, how or when, where, but even if we plug that in, we've still got a, you know, and even if we don't fill the reserves, we've still got over a $100 million deficit. Yeah. And again, would you shut school for a year? I don't know. And again, keep in mind that assumes, and this gets to the VLCP issue, this assumes that all of the property tax money that we were assuming we would get back in January comes in. So this assumes that the December one property tax parameters that were recommended by the tax commissioner and the tax revenue that was associated with those parameters comes into the education fund. So, okay. So the towns collected, they pay it in December and June, right? Yeah. The cash flow is actually really complicated, but okay. Yeah. If you just briefly municipalities or the taxing entities, so they raise the money, where the money goes from there depends on how much money the town raises and how much the school spends. Some of the money ends up getting paid into the education fund. Some of the money goes directly to the school district. Right. That's why it's tough to track this late in the year, even though we only have an April 30th payment left. It's the April 30th payment is one third of the money due from the Ed fund, but a lot of districts have already received their allocation from their municipality because the money has to be remitted from the municipality to the school district within 20 days of collection. So it's a really, it's a really complicated revenue flow, but yeah. Madam chair. Yes. Could I just ask Mark, I'm assuming this is the case, but in your FY 20 projections, have we spent all the reserves? Yeah. That $39.5 million whole assumes that we use up about $13 million surplus that we were anticipating, plus the entire stabilization reserve, which was about 36.4 plus now we're down another 36 point or another 39.5. Yes. That scenario I laid out assumes that we go into FY 21 with the covered empty. And the federal money while we're still learning more about it, that is meant to be applied to the coming year. Is that true or do they care? I don't know. I think the money could be in the regulations or the law that I looked at it said it could be used in FY 20 or FY 21, but I'm not sure how it's going to be used. All I know is that it goes to AOE and then directly to the supervisor unions bypassing the education fund. So whether that money gets used to address additional costs that distance have faced this year dealing with COVID-19 problems since they set their budgets last year or whether that money is available for use in FY 21. I don't know at this point. So I've just left it alone for now, but there is $27 million there that we can count on. Yes. Okay. But that's still something of a drop in the bucket at this point. But I guess the information we need right now is, and we can have our folks back in next week, but what is school spending looking like now? I mean, they're doing some things extra, but they're not doing other things. And what's an interim look at school budgets this year so that we can start getting a full picture for the demand next year. Yeah. And that applies for FY 20 since we don't know exactly how much they're going to end up spending this year, but it also applies to FY 21, although almost all districts have voter approved budgets. In most cases, schools have not closed negotiations with the teachers union over what teacher salaries and non-healthcare benefits will be next year. So we're uncertain on both in both years exactly where spending is going to come in. Yes. So we needed at least for this year and figure out if schools are running ahead of budget, behind budget, and how many. So we're missing that. I think we can assume, but I have expressed concern that Senator White isn't hearing me about giving towns blanket authority to reduce interest in penalties. Because if I think if they do it on an individual basis, it's fine. But if they do it on a one on a townwide, you know, we're just going to postpone that means some people who can pay won't pay. And we need to make sure we're getting as much money in here as we can. So because the towns normally make sure they collect that because they have to pay us an 8% penalty if they don't. But they're asking us to forgive the 8% penalty and then put any borrowing expense on to us. So we're negotiating I think. So I think that VLCT has identified a real issue. We flagged this a couple of weeks ago in the issue brief. And that is that the municipalities act as the agents of the state in terms of collecting the property tax. They collect the municipal property tax. They also collect the education property tax. They have authority to obey, delay, you know, penalties and all that kind of stuff on the municipal side, but not on the education fund side because they're just acting as an agent. So even if they don't collect from their residents, if they don't collect some of the property tax they're owed, they remain on the hook for the education fund payment that either would go into the education fund or directly to their school districts. So that's a problem because they've got a double whammy there. They lose their municipal property tax money and they have to find the education tax money in order to pay it into the education fund. The way that that is dealt with now in towns or short is they can go out and short-term borrow. So the 8% penalty is a penalty nobody should run into if you can go out and borrow for much less than 8% and make that payment. The problem as I see it and I haven't dealt too far into this with the VLCT proposal of having the state borrow for that is that first of all we have no idea how much we would need to borrow. We don't know how delinquent taxpayers are going to be in terms of paying an FY21. In FY20 the issue is taken care of. So in FY21 is really what we're talking about. We don't know how many taxpayers will be deficient and it's going to vary widely, I imagine, between communities. We have over 250 individual taxing entities out there and to have them all making this decision independently is just seems to me to be inviting a whole lot of chaos into the process. You're going to have 259 different decision makers deciding about who is who has a hardship or who can't pay versus who has a hard time paying but may be able to. So there may be other ways to prevent a huge property tax increase from hitting taxpayers next year that doesn't have to involve providing, protecting the municipalities from having to pay that money on time. It may be that you could for example if it's allowable we don't know yet because the guidance is not in fully but it's possible that some of that CARES Act money could be used to assist property tax payers in coming up with the money they need to pay their property taxes in FY21 which would relieve the municipalities of the problem of not having that money to limit. So there are other ways that may be able to address this problem that are a lot cleaner than trying to have the state borrow and deal with this 250 plus entity entities making decisions going forward. Does that make sense? It makes a lot of sense. But we're still waiting I guess to hear what the strings attach to the CARES. The CARES Act money I've been told that we should find out this week early next week we should have more guidance on that. The National Governors Association has recommended language that would allow us to use that money to offset COVID-19 related tax increases and if that language were adopted I think you could use some of that money to offset this $185 million shortfall on the Education Fund next year but you can do by lowering the rate rather than trying to deal with this very piecemeal piecemeal that would that would definitely be ideal because it's it's going to take different parts of the economy a while to come back some may come back right away some and we could we could be shut down again next fall we don't know so it is a time of uncertainty. All right anything else? Well that was good news. That question mark comes out backwards you know when you fold it up. Mark gave us a dollar figure for what the public schools were likely to get from the feds and is it is that all the money that's been spent to stay Vermont for education or is that just the share going to K-12? That is the amount of the K-12 money that would go directly to SUs the total amount is about $30 million but the agency of education would be able to retain some of that money for administrative costs and for emergencies and there's also another small part of about four and a half million dollars that the governor has discretion over however that money has to be split between higher ed and elementary and secondary education and education related entities which I'm not sure what that is but anyways it's a money that would get spread out more broadly. Mark isn't there an equal amount going to higher ed or relatively an equal amount? Yes I think it's a little bit less I think last time I went there it was about 22 or 23 million dollars that would go directly to higher education yes. So that we know how that's going to be? We know if that's state schools or? Yeah I haven't tracked it I've been just I've been focusing on the K-12 stuff so I can't really answer that question Stephanie maybe hopefully answer that for you. Okay Senator Campion did you have a question? I'm sorry I'm sorry to have interrupted you I was just wondering how that might be divided between the state colleges and UVM I think it was the same question you had. Yeah so I don't know. Or it may be going to private colleges too. Senator Baruth? Yeah we heard from the higher ed people yesterday and they are getting equivalent amounts and it's divided depending on how many Pell grants you have and there's a an algorithm that generates your total that way so there's a we we got sent a list of what all the various colleges aren't getting. Okay. That include the independence as well? Sorry. That include independence? Yes. So the private colleges are getting it as well? Yes. Would you mind sharing that with us? Yeah I'll send it or I'll have Jeannie send it one of the other. Jeannie have your people send it to our people and we'll all get it. Okay anybody else just holler because I have to switch screens okay. Mark are you ready to pass the baton over to Steve? I am. Okay it is more like a hot potato. Okay Steve you're muted. And yeah and I'm just going to add a teeny bit of color but it's Mark really is the detailed person so in the last since their last meeting we've been following up with the treasure one possibility would be to not take over the loans as the VLC suggested but to offer to subsidize the any sort of interest they have to pay for short-term borrowing or percentage of the interest because there's a pretty strong likelihood and we've checked with a bunch of other controllers in other states that interest would be deductible if you have to borrow money for because of the coronavirus. That's pretty much covered so that the loans could still be as needed by the local communities and we would want to understand the treasure has worked with the banks and there's a receptivity on the part of the banks to make the loans and if we were to help them with the interest payments that that would be a more normal course of what we could do. So I just want to throw that out there is that's for this year. That would be for this year and then it's unclear whether you whether you need what you know next year whether you continue it or whether you just use it this year and then have to think of a similar different system for the coming year. I think we're assuming that there will be more people not paying their property taxes next year. Right and I think that's what Mark was talking about. Do we do we find some way and I don't think yet we can use the coronavirus money to pay for a property tax subsidy but that's something we're looking at. I don't know if that's a definite at this point but it would be a possibility. So we're still waiting for guidance from Washington. Yeah and not just Washington. I guess it's a funny situation because there are three real rules that this money is bound by the CRF money. One is it has to be for expenditures essentially related to the coronavirus or the COVID-19. It has to be for expenses occurred between or actually between March 1st and December 31st of this coming year and the third thing it can't be for things that there's already been appropriations made to cover and those are the three limited walls we know of now. How those interpreted you know how much flexibility is pretty much up for grabs and we haven't seen the guidance but the word is the guidance will not be dispositive. So what you have happening both in our office and the treasure and the fifth floor because we're all talking to our counterparts you know their states and trying to find the concept of their safety in numbers. It's like five or six or seven states decide to we do one thing then people say well hmm maybe we can do that because the odds of you know somebody coming down and saying those seven states are the wrong go down and so it's not it's a very fluid situation there's not a lot of clarity and it's a problem. Okay Sandra Pearson I see your hand. Thank you Steve I keep asking this with different experts in the seat but we haven't appropriated a single dollar for FY 21 and so by this the layman's description you've offered we could stick the whole money into our general fund based on the idea that we hadn't appropriated it yet surely that's not the case but can you just help me understand to the extent you understand at this point those really basic elements? Yeah so the thing is there are three things one is it has to be for expenses that haven't been appropriated which you just talked about it has to be for pieces that are essentially expenditures related to COVID virus outbreak so and it has to be in this sort of a time limited so if we've already if we just put in our general fund and use it for random stuff that wouldn't meet the test of essentially going to COVID virus we we couldn't track back that so there is a lot of what we're going to do is keep it as a separate fund like we did with ERA years ago and it'll be listed as CRF funds and every time we appropriate it we'll know pretty much what we're appropriated for because we have to track it separately. So that's helpful so I have heard that it was one of three things but you're saying it's a three-part test? That is so far. Yes and are you obviously I'm assuming you're inquiring whether or not drops in revenue which are directly related to the crisis would be a COVID related expense right? No and then that's that's the really big problem every advocacy group is trying to change the rules on that but revenue drops are not an expense so it can't be used to make up for revenue loss and that's the problem with if we just cover you know a revenue decline. Under current rules nobody thinks that that's coverable and there's been some direct guidance from the professional research service from other people indicating that's the case that we cannot use the money for that. So Steve is that true COVID-19 related revenue increases as opposed to loss? So this is the thing my understanding is that if you're so explain to me what you mean by COVID virus 19 well really revenue increases. Property taxes is going to go up by 20 cents next year that's a COVID-19 related impact and can we use that money to provide some assistance to taxpayers to avoid that COVID-19 related expense if you can say the word expense. If you're avoiding an expense then you then you have a little bit firmer territory than if you're you know you want to be away from the revenue. Yeah I think what you're saying if the costs are going up and you need to cover those costs and you cover with this money you have a better case than if you're covering a revenue loss. So it's in a gray area. I'd see it as charcoal gray because yeah if you're covering just basic school expenses the costs have gone up because they voted the cost to go up back in March right right the costs are going up the property taxes are going to have to go up because we've lost revenue. The other problem is we can't cover things that are unrelated to the COVID virus. I mean sort of the three pieces are that it's an expense that it's in it's related to COVID virus so it's just to cover increasing costs in the education world that would not be my interpretation. You know I you my sense of the ledge council if they're online can talk more about this but those are our problems if you don't have that you have those three conditions basically. Now hopefully there is a COVID-4 in the works and we're small change when it comes to lost revenue just in total dollars so other states are yeah everybody's pushing for a change. Yeah but you know we're sort of living in the world now so most of the ideas by using the CRF money are related to covering expenses that could be related to COVID that are that come out and you can be pretty you know housing for homeless people who have been affected and maybe you know what about broadband you know it's a big need you know yes you know the there's a there's brought you can you know everything's as you said there's shades of gray we're engaging to charcoal and black and you want to sort of but the education world distance learning clearly the broadband need that they have you know some additional cost feeding costs things like that it's when you get into replacing revenue you're sort of a little bit on the other side of the line at this point however paying interest that wouldn't have been needed to do if it wasn't recovered is something that most people feel is coverable. So if you have to borrow to pay the state yeah then that should be deductible send a perch look and I'm looking for Steve a question during the aura era would they had a very specific prohibition on supplanting and is that kind of the same what you're that they're saying here about replacing revenue yeah yeah that they didn't use the word supplant but they said anything that's already been appropriated or any bill that's already been passed before March before the date of the passage of the act which I think was March 27th I'm not sure that that is an issue okay so you're right it's very similar well but we were able to address that issue even though it's very similar simply by reducing the general fund transfer for two years by an equivalent amount of the money money going to the supervisor we didn't have that we you know it was a prospective issue and so then you get into this question of you know I don't you know I I don't want to get ahead of my knowledge and I probably am I don't remember exactly how we handled that in there but we clearly did and I think we may have been the growth in spending but I don't know if they did the same thing where bills or things passed prior to a date it was more of a general supplantation language and it may have been different on how the two were structured the they have the same concept with every different language in the two bills we would have to go back and find out what differences were maybe Bill Calvin knows I don't know he's he was involved in that too okay I think if we haven't got any more questions for Steve um I know that Secretary French and the folks from the Department of Education are here so we can yep we're only three minutes behind time so we can move on to them unless Steve just built no that's fine okay so we will move on to Secretary French and switch my screens welcome and Brad and Bill Bates and welcome I know we had you in last week you were just starting to work on all these wonderful issues um I just wanted to have you back and talk to us about what you were thinking at this point um we're sure you found a way to bail us all out of this what is it 186 million dollar hole so the floor is yours okay good afternoon uh Madam Chair it's Dan French Secretary of Education I have uh Bill Bates uh who's our CFI with the agency and Brad James who's an Education Finance Manager uh we did prepare sort of a written summary of our thinking to date uh for you hopefully the committee members have a copy of that uh if you send a dn it is posted on the website so everyone can I'll just walk through a little bit you know so those comments uh Steve was making previously yeah we're going to have unanticipated costs for sure as a result of COVID-19 I think it's early to say you know where those areas of costs have become the greatest but I think it's fair to say across the board um we will have increased costs with alcohol student supports you know special education mental health services and so forth I think we we are not far enough into this yet to understand the nature of those costs but I think it's fair to say all districts will see increased spending in those areas particularly as the emergency winds down and districts are required to provision make provision for what are called compensatory services uh for particularly for disabled students to fall in behind so we know there's going to it's the conclusion is we know there's going to be increased costs more than what we know right now at this moment in time the um we have a better handle on CARES Act to a certain extent since we last talked in particular uh we know more about uh there's basically the two parts of money relative to education one was the elementary secondary emergency relief fund not much new there other than to say um the talking with the the federal government on Monday they alluded to the fact that we could expect the guidance from the application specific specifics on that to be out basically in a week and a half they're required to get it out by the end of the month but it might be out a little sooner than that so we don't have any more specificity on how those funds will come down for districts yet basically we'll know here in a week or so where we have more specificity on is the other pot of money which is the governor's emergency education relief fund that Vermont's share that is four point four million dollars the application for those funds went live on Tuesday of this week and um just to recap these these funds are um not necessarily dispersed through the SEA that they're basically coming out from the governor's office somehow or from more broadly from the office administration um there's three areas it's designed to give governors some flexibility but basically um to address the needs of an LEA that was significantly impacted or LEAs have been significantly impacted by COVID-19 higher ed is an option as there's an option to provide direct those funds to be more broadly utilized to any education related to the United States that was essential for carrying out the emergency services of educational services for students so it's pretty pretty wide latitude and that and the application process is fairly streamlined um we're in the early phases of uh formulating that application um I can say that the governor doesn't have specific priorities yet um but he has expressed an interest to work closely with the general assembly on formulating those priorities so um that's the one piece of the news we have at the CARES Act um in terms of then you know just my written testimony not not giving you any answers per se but um I think you know based on our thinking um we call policy considerations um you know firstly uh revenues from the CARES Act alone it's not going to be sufficient to solve our problem at the state level or the broader state's condition so it's important to acknowledge and even if all the CARES revenue was somehow allocated to the hole in the ed fund it wouldn't it would be significantly insufficient um so therefore we conclude um in fiscal year 20 anyway that someone's someone's gonna have to do some borrowing basically to fill the hole um and we we can envision uh we probe some ideas around the state doing the borrowing uh districts doing the borrowing some version thereof where local municipalities are doing some short-term borrowing to fulfill their obligations to cover ed payments back to the districts um and we didn't we didn't play out in greater specificity of how that sort of second option of how um CARES Act revenue basically could be redirected to the ed fund through some sort of build back provision or cloud back approach but we do know it is possible it's just overly complex just the mechanics of it I want to say overly complex this is more complex and um also politically you know more challenging to enact but I think you know our conclusion is that you know borrowing will be necessary obviously and lastly we think you know fiscal year 21 and fiscal year 22 I would say 22 I mean the budget process that districts would be engaged in in the coming fall we think it's important because we have this sort of bifurcation our system where local local leaders make sort of the spending decisions but the state basically takes care of the financing decision that we think you know basically there needs to be frequent and regular communication about the fiscal context so we can get out in front of the budget matching process at the local level out in front of the collective bargaining process at the local level and so forth so folks have the best information to make those decisions so I mean to to bring that down to sort of concrete recommendation it would be something like having the December tax commissioners letter coming out in July or on a monthly basis through the summer so folks are aware of where we are relative to new federal money coming in or the latest revenue projections and so forth but we start much earlier with with districts in that regard it also helps inform how they can use or how should they should they use their CARES Act revenues which my conclusion to superintendents I was speaking to them on a state what I call about 20 minutes ago or so if I were a superintendent I'd be you know being very conservative with that funding with a focused on the need to to be able to support and pay for those student supports that we haven't or know are looming out there on the horizon but are going to show up from a budgetary and programmatic perspective very soon okay any questions at this point for Secretary French I'm not Madam Chair yes Senator Hardy thank you I don't know if Brad or Bill is going to speak Secretary French but just want to ask you what your thoughts are on the FY on what may be able to be done for the FY 21 school budgets have already been passed we know that 19 haven't yet been dealt with and the Education Committee has been talking about that but the school district the rest of the budgets were passed just literally a week before all of this went down and I'm wondering if the agency has talked about any possibilities for how we might address those on a more global perspective given the situation with Education Fund yeah we haven't really yet I mean it's just due to the nature of this emergency situation we I think in the last five days or so been really trying to delineate our thinking on fiscal year 20 versus 21 and I think you know as we've been I think rightfully pointed to consider the fiscal year 20 situation first but I think you know we're we're gearing up to deal directly with fiscal year 21 we had an invite brought Brad to chime in and Brad and Bill were both I believe both at the VASBO meeting which is the association of school business officials the business managers basically so there's a lot to give and take at those meetings with AOE staff so I don't know Brad or Bill if you want to chime in in that regard I can get unmuted there we go we we haven't talked again Dan Bill and I have talked a little bit in the background of about FY 21 bits and primarily FY 20 we're dealing with and how this cares money is going to full play out but when I was talking with business managers the other day we were talking more in terms of what's happening currently as opposed to we know this not going to be pretty next year we did not really get into the idea of what could possibly be done with budgets they're all aware that budgets can be brought back by by the board although again as I've said to a number of people that's probably not a very good idea because it could easily go south in a really bad way by opening budgets back up so right right now the folks who have passed their budgets that's kind of where they stand at the moment there is there is talk and and really I would leave a centered Bruce to talk about more but there is there is discussion as to what to do about the 18 I guess it's 19 districts that do not have budgets nine of who failed their budgets on town meeting day one who postponed it because I think I can't tell me they're right after because of COVID-19 and the others who have not yet had a budget vote there's talk about what to do with them but otherwise we haven't really gotten to the point where what are we going to really seriously talk about what people have already voted on in the past I think at some point we're going to have to set a tax rate a yield and I don't think it's going to be very pleasant news that is an understatement madam chair I am sure it is is so I think yeah yeah I just wanted to follow up on okay and then I've got Senator Pearson so Senator Hardy and then nope that's a follow-up thank you it's just a follow-up on that I bring it up because obviously we need to be thinking about FY 21 but also school districts while they have passed their budgets many of them are in the midst of still figuring out the cost of their contracts for next year and that will that will quickly the opportunity to make adjustments there will quickly go away if we delay too long so we have we have just a small window before many of those contracts will be finalized and and therefore unchangeable so I just you know think we have to have that conversation now sooner rather than later we did try and have that conversation I think I can say we got a mixed reaction I'd say the superintendents understand the issues the NEA were quite as receptive principles were in the school boards were kind of in the middle so I think we have to agree this is not the time to talk about level funding and not giving people raises on the other hand the numbers the money isn't there right now and it's going to be very expensive for the people who can pay to fill that hole so that's an issue Sandra Pearson yeah I I guess I would offer that we barely scratched and began to have that conversation in passing and probably need to find a different way of organizing that conversation but you you mentioned madam chair that we're going to have to set a yield rate and it's going to be unpleasant I I think I would offer it's going to be untenable for us to ask for a big property tax increase when my court of our workers are unemployed I hear mark I see mark offering McDonald so I switch screens what's he doing he'll have to unmute when he gets called on but I just think I don't pretend to know what the solution is but we are in a real bind and I think we owe it to ourselves to outline a process we owe it to the districts to outline a process and with some timeline and I don't know that we need to do that here right now but pretty quickly we're we're we're gathering a lot of information it's all bad news and that's going to become apparent if it's not already what is less apparent is is a timeline and even a commitment to from the legislature to to try to come up with the solution Mark has anyone calculated if we had to do a tax rate on what we know now with a $39.5 million deficit what would that tax rate look like maybe that'd get people's attention you're muted I don't have it in front of me we would need to calculate it we can do it what we have looked at is leaving the December 1 yields in place which would have required a five-cent or a six-cent increase tax rates and 21 depending on whether you're homestead or non-homestead and assumed that all that money came in and then look at the gap that needs to be filled from there but at 185 million it's about eighty eight and a half million dollars per penny so that's a lot of pennies yes it's a lot of pennies this time Serna McDonald you are they said this morning someone was going apoplectic I think you're there it we keep referring to the property tax yes instead of the local education taxes yes and when you set a tax rate for next year what is going to be noticeably different is the local education taxes paid by people who pay on income which probably represents Mark Perot give a better number which probably represents 70 percent of Vermonters but next year 80 percent of Vermonters maybe 82 percent of Vermonters will be eligible to pay their local education taxes based on income and when you set a new rate you have to take into account that that group of people is going to be larger and will owe less yes before you before you set the rate and that you actually catch complicated because the property tax adjustment that people receive in 21 is going to be based on their household income in 2019 okay exactly or any of this happened so they're going to get a property tax adjustment that doesn't do a lot for them that will be made up in 22 a little bit of uh not great news for a taxpayer to find out that you're going to you're going to get your aid but you're not going to get it for another year out and then back to Senator Cummings your original question a quick calculation is that tax rates based on all the assumptions I laid out which include 80 percent of collections of non-property taxes and all that kind of stuff and all the things we've gone over be about a 21 cent increase over the 5 cent increase that was already recommended 26 cents okay so 25 it's just it's just enormous so my question is when the the number that mark has just given us is that based on a recognition that perhaps 80 percent of people or more will be paying based on their incomes or does it assume that the same number of people are paying based on their incomes yeah in FY 21 they will not be paying based on their incomes they will be they will get a property tax bill that's based on that 25 or 26 cent increase and they will reduce that by the property tax adjustment that was determined based on their income back in 2019 so they will they will they will get wet and hit hit with a full freight of this thing just like a somebody who pays right in 22 hopefully they'll be back to work and their incomes will be up and they'll get a rebate that year but that and then that that means that in 22 the property tax adjustment you could expect a little bit of a spike in there right that would be mitigated somewhat because unemployment insurance and other cash payments from the government count towards your household income so I'm going to be offset a little bit but I would expect to jump in there so we're looking at a problem that's you know several years rolling out before it rolls out and there's I mean there's virus repeats and all kinds of other things that we don't know and can't control but that 10 percent might be the 10 percent most likely to have difficulty because their incomes higher income folks that $600 is not going to make up what they were earning and what their mortgage and their expenses and everything else is based on those are the folks that might have the most trouble paying their property taxes and I think one of the things we might do is work with the towns to come up with rather than forgive but work out the league talked about doing a payment plan with taxpayers and I think we might want to talk with them about what that payment plan would look like and so that we could get some predictability as to when those taxes were likely to come in and how much if it's not $200 if $50 can come in per payment at least we know what's coming in so that's something to look at with them so we need to talk about payment plans all right okay and I'm here yes ups next screen yes for the folks from AOE on the screen on the call can has there been any discussion with the tax department to your knowledge or if you've been involved in it that might help us address this year lag I mean I know we've always been frustrated with the fact that your income could change and you wouldn't see that reflected in your income sensitivity for another year but we have had a sort of process for people to call and file I forget the term but basically get a forgiveness or some kind of mitigation strategy on a one-to-one basis and it just strikes me that if we leave it alone and just shrug away this problem that the tax department will be completely swamped with these requests and we might be wise to set up some kind of maybe even in a short-term way for one year a process where we have a way of honoring that anybody aware of those kinds of conversations within anywhere in the administration I am not I don't know if Brad you've had any but we can certainly convey that no I'm not nor am I familiar with what you're talking about in terms of for lack of a better term a waiver or a be near something like that well the the tax commissioner can give people some kind of hardship yeah way out at least on some taxes I assume that can imply to property tax too although I'm not yeah it can and it's a tax advocate but we might want to talk about submitting and getting a payment plan you know is is much more wholesale than trying to do this on one-on-one okay Brad did you have something no no nothing specific okay anybody else I'm flipping screens okay send a ballot just briefly to go back to something that Brad said during his presentation you said we don't want and I'm paraphrasing here we don't want to go back and start opening up budgets that have already passed because things would quickly go sideways and unravel and I think many of us can imagine what you mean but I'd love for you to just make it a little bit more explicit when you say that what's what's the fear there because we're in a different economic situation than we were in a month ago everything has changed not just in Vermont but nationally and globally so talk talk me through that a little bit more if you could so I think right now based on the budgets that have come in and this is including the budgets that failed and went down the ones that haven't yet voted the the average statewide increase was 4.2 was 4.4 percent on education spending so I think have those budgets votes been taken place three weeks later a month later I don't think the the as many budgets would have passed as did obviously the budgets were built long before this was thought of because buds were being built back in November December and January is when they're starting to start to be finalized I think if if if boards were to go back and say we would like to lower and their IE our budgets which will drive your education spending generally speaking I think one of the things that might happen is that they're opening those up and then they have to revote them people are going to say no that's still too much and at that point they've already passed the the timelines for for reductions in force with the teachers and other staff members that that that time has passed so they're going to they're going to remit the contract issues I think they're not going to have places to cut their budgets really without directly impacting probably critical services to the kids is my guess because there's you know the the numbers that you're throwing out are 75 80 percent of a budget is right and benefits now can I jump in here for a second and correct me if I'm wrong but but just because a district budget budget spending for the year and voters approve it does not mean that that money has to be spent correct no it does not and and one of the things I heard from one of the federal webinars that I was on a while ago was their recommendation to school disorders to save their reserves this year and use them next year try to blow them but you're right mark they do not have to spend what they budget they can they can cut back on wherever wherever they possibly can again I don't know where they can cut back well what I'm thinking about if you still have teacher contracts open I understand that the negotiations have closed on healthcare which results in about a 25 million dollar increase right but we're talking about a 73 million dollar increase overall and as you point out salaries and benefits are like four fifths of the total cost so it seems to me that if you have most contracts that still have not been settled there's a really short window it's short but there is a window there for some potential savings at the district level I'm I'm unaware of what what contracts are out there that not so that was the first I've heard that most contracts are not settled due to the healthcare settlement from the the healthcare parts settled but what I heard as in this is this is changing day by day but I heard as of a week or so ago that only three districts had closed negotiations with teachers and the rest of them were remaining open yeah I'm I'm I'm familiar with that I don't know okay I got Senator McDonald and then Senator Wood perhaps in order to try and deal with the the 18 budgets that haven't been established we could ask Mark Corral to apply just as an exercise to apply the average increase to all those school districts that for that the rest of the state had and the reason I suggest we do that is because it might we might find that we are going to take a look at all the school districts and squeeze them in the in the months to come and squeeze them proportionally and if we're going to do that the the school districts that have not yet settled have to be in that group that may get squeezed so I just that's a step that we ought to deal with first before we help we're going to decide how we're going to deal with everybody that's my suggestion Senator Bruce I understand Secretary French has something all right we did Senator Baruth and then the secretary okay so as everybody remembers from the all senate calls we've in senate ed we've produced language to cover these 18 or 19 districts I think 19 with Rivendell um and the idea is that if they can't pass a budget then they're level funded to last year as a result of that we got a small you know wave of mail and this goes back to where we started these districts are saying that they're now incurring increased costs so they're frightened at the idea of a level fund to last year would force them to make very substantial cuts in workforce and other things so I guess my starting position is that if we can not go back into budgets that have already been voted we should do that if that means borrowing if it means other things though that strikes me as preferable we could set up guidelines without touching the budgets that have already been voted on we could set up guidelines for the following year's budgets that make it clear that they are going to need some of this money going forward that's kind of a way of having it both ways for us because they are getting 27 million dollars yes um to help cover those increased costs this year or I halfway through next year so the schools do have some money coming in we in the other hand so far don't and a 26 cent tax increase is how much blood have we shed over five cent increases or two cent increases so I want to get to Secretary French and bless this is a follow-up it is the the other thing quickly is if you go back to Phil Scott's first year in office we we had that big fight with him over what amounted to a clawback from districts and he wanted 26 million we did 13 million and that 13 million was so painful that we wound up you know we wound up doing other things the following year as a result so I'm not saying that we shouldn't squeeze the districts as Mark talked about but with that said there's there's a level of pain that those districts can absorb and beyond that I don't know that they can so we would have to be extremely careful in those discussions no I I agree okay Secretary French yeah I was just going to follow up on uh Senator Balin's question uh and Brad's response I think it'd be one thing if the voters uh we're could have an informed perspective at this point I think so much if the budgets were reopened now so much of it would be emotional and the anxiety I think I think the um and this issue that we don't my prediction is we don't even know what the costs are going to be as a result of the student support issues that are about we don't even know that yet I'm not it doesn't worry me so much that I would say the incremental overages that districts are experiencing now because I think there are offsetting revenues and they have some flexibility but the new things that we're going to be embarking upon and relative to student supports and so forth as a result of the emergency we don't know yet and I don't think the voters are going to be in a position to contemplate that I think that really points to school boards having to as you've sort of concluded I think the school boards are the ones that are needed going to need to navigate the context as as we can make it more clear for them but to open up the budgets now I think we're just you know to the question about well what's opening that can of worms I think that's that's my concern is that the voters wouldn't necessarily be well informed enough to do that and what's in front of us in sort of an incremental reaction is really what the boards are going to have to wrestle with and rightfully so because they're the ones that have that ability to understand the impact on the whole system is so much that we've asked districts to do in the last several weeks is the new uncharted territory new work and I worry about just sort of incrementally or blindly politically reacting to cutting programs and stuff right when we're asking schools to serve a central purpose and the stability of our society it's emergency so it's going to be a challenge but there is the whole question of and how do you vote on a town-wide basis we haven't quite had a run through with having the house vote and that's only 150 people we know how long it took us to do three or four non-controversial bills doing just having to do roll call to adjourn and how it might be a good run through for the elections next fall if we're not able to be out by then but there's other issues school boards are this is not an ideal format for deliberation and negotiations right can I follow up in yeah yeah um and I don't I don't want my question to be misconstrued as me advocating for opening up school budgets just to be clear I'm just thinking this through because in so from where I sit in in browborough my kids go to the to one of the districts that has not yet settled its budget and it hasn't settled its budget because we don't have town meeting until the third week in March and of course we didn't have our town meeting and all that stuff and so the the reason why I ask it the conditions have changed so we're asking that district essentially to take a level funded budget because we know more now right it will there be an inflator that's my question senator we're not asking them to take if I may yes please we're not asking these districts to take a level funded budget what we're saying is if you don't manage to pass your budget then you have the level funding which is preferable to what's in law now which would be 87 percent borrowing capacity of last year's budget so so what we're saying is yeah you you still have the option going forward even past June 30th to pass your budget if you don't manage to do it we're just swapping out the default for a more attractive option for them so so they are they are still welcome to pass their budget if they can't for some reason they will get instead of eighty for eighty seven percent of last year's plus interest borrowing costs they will get a hundred so our legislation makes your district better off and doesn't take away any of their power to pass a budget well and we can take I think that is mostly true I have some concerns but we don't have to talk about it now what's not true what I mean that's now that's accurate right no no I'm saying it's what you're saying is accurate I'm not saying I'm not at all talking about the accuracy of what you just said I just think it's more complicated that's what I'm saying but we can talk about it offline I don't want to take time within the committee it's always more complicated than that that's the motto of the health and welfare committee okay um any other Senator Pearson I guess I have a question for Mark Perot and then one for Secretary French Mark you said uh schools don't have to spend the amount that they've budgeted uh and I think we all understand that my question to you is does the Ed fund and the state have to send them the money of the budget that's passed um I guess that's a legal question I'm not sure I assume that we do but I don't I don't know the answer to that um Brad shaking his head maybe he does okay Brad you want to have you got an answer no because I'm not a lawyer but I think my understanding of how the the way the language is written is yes they they do the Ed fund does have to send that regardless and just just one quick point um just to clarify that and this is the beauty of you know cell phones where people can send in text while you're talking on this um is that that when when they're contractual obligations they have to be paid the following year so that's kind of going back to what I was saying salaries and benefits will pretty much be done at that point um right cut the any any reductions will have to come elsewhere or people will be borrowing oh yeah you have to lay off personnel which is Senator Pearson's question I think I think the Ed fund is I think state is obligated under current language to send that money out that's what I've always been told because before act 60 when we were doing grants um the state didn't always pay the full grant if the state didn't have the money and the schools were left hanging so I think and I'll look to Senator McDonald who's my historian that that was part of the deal is that if the state said they were sending you x amount they had to send you x amount they couldn't say well we don't feel like it because we don't have it for years that's exactly what happened and the current law is as Brad has stated it and the legislature can say notwithstanding and then do what we what we choose to do prior to July 1st and my comment about squeezing freezing or lavishing school districts is that we ought to settle the 19 schools and get them on the same playing field before we make the decision whether to freeze squeeze or lavish and I think the education committee has made a step in that direction by moving to the hundred percent okay and then secretary French you said that you hoped school boards would make these decisions and so is that the agency's sort of operating principle in terms of how we're going to address the the huge shortfall in the next in next year's headphone yeah in our testimony we're basically suggesting the future the fiscal year 21 and 22 the best approach there is to provide the boards a very you know and certainly the broader communities a very close understanding of the context that we're in and and I think in fairness to them we don't know fully that context yet they certainly don't know and we don't know the policy implications from just from an educational service delivery perspective what the implications of this full crisis will be in terms of how what services they're going to be asked to deliver so to just to pretend that it's just the regular budget process is normal and just figuring how to work in constraints I think is only half it's like two-dimensional we're really the third dimension of this is there's a whole another level of service definition that we haven't embarked upon particularly compensatory services for disabled students and so forth and increased mental health costs and that kind of those kinds of considerations all need to be brought together so I guess our point would be provide all the information we can in terms of understanding the context in which they're going to be making those decisions but we also just to do this in the most responsive way possible need to empower locals in their specific regional context to navigate this crisis and each region and different each district is going to be in a slightly different situation to a certain extent so I think you know that's the best we can do right now and once again I know that's sort of a superficial approach to sort of delineating fiscal year 20 versus fiscal year 21 and just sort of kicking that can down the road for a couple months but I think that's our best thinking at the moment and maybe we'll have new information from the federal government that would change that but that's what that's what we're thinking right now we're hoping okay so right now for this year the agency of education is just kind of letting it play out for now to see what's happening at the local district and waiting to see what kind of federal funds come in but at some point we're going to have to make a decision about tax rates and we've got a bunch of other decisions like the 8% and letting the towns off the hook and other. We know the CARES Act will have a firmer handle on it about 10 days so we can certainly you know we're happy to come back next week on an update as well but to at least nail down some of these variables I think would be helpful so we'll we'll know more definitively you know that's what we told about the U.S. Department of Education. Are you talking to the schools at all about trying to gather information on what their spending looks like this year because that would be helpful I mean if if they're spending more less or the same just for different things that would be one thing if they're going to because they're getting some money sounded like a lot so we looked at the deficit but they'll get some money and you know be helpful to know if that money's going to they've already used it up this year and they're just going to be backfilling or you know what's going to happen next year and just somebody needs to start getting that information for us and yeah I think that's definitely something we can do it's just you understand it's a very dynamic situation right now oh yes you know firstly just I think you can appreciate that we don't understand the federal the specific federal guidelines and we'll know that but just the issue of you know to drill down on a specific issue that the superintendents and business managers are looking for guidance from us now on the issue of special ed reimbursement I know you're all familiar with our reimbursement formula and special education we have just essentially in this paradigm of continuity of learning redefined or reinvented the regular education learning environment for the rest of the school year for all intents and purposes oh yeah from there we're starting to now dig into what how our student IP is going to be affected what support systems are going to be necessary for students to be supported in that environment the issue you know we have an emergency order from an economic stability strategy that requires school districts to pay all their employees out for the rest of the school year some of those employees particularly para educators might have been providing special education services in accordance with the students IP and therefore 60 of those services the cost of those services were reimbursed under our special ed reimbursement model districts are continuing to pay those employees as if those services were being delivered but they're not necessarily being delivered right now we're not being delivered in the same quantity or manner because the fundamental regular ed and learning environment has been redefined so they're asking us well we're okay so we're making these expenditures because you're ordering us to do so as an economic stability measure we need to know if they're going to automatically qualify those expenditures for the 60 percent reimbursement you know they're asking questions like that of course it all comes out of the ed fund but theoretically part of that maybe could not be covered by CARES Act and then we run into maintenance of effort issues uh supplanting issues I mean so there's a stuff is not overly simple and we don't know the patterns of their expenditures well enough yet uh to determine you know it's not as simple as like calling it up and saying how's your budget running because the budget's gone essentially and now we're in a different different scenario altogether but the good news I think is that every week that goes by we get a lot more certainty on that so I think if we if we take the CARES Act trajectory meaning that we we are promised to have guidance on that within 10 days or so we'll have more specificity on the financial condition of districts in 10 days as well so I think you know by the end of April we'll have we'll be able to admire sort of the trajectory of where things are heading and coincidentally that's more or less the same timeline the governor's given me for making some decisions on end of year celebrations graduations and things like that so we'll be getting closer to that May 15 deadline uh where the stay-at-home order and so forth so we'll start to be able to understand a little better how the rest of the year is going to unfold at that point so I would say yeah we're happy to get that information to be premature for us to try to give it to you tomorrow oh yeah no I just I think I think we certainly it's part of the puzzle yeah and if we're gonna do a tax rate at some point we're we're just trying to get the lay of the land here so we know what we're dealing with okay uh Brad did I see your hand you you did and Dan actually kind of covered I was just gonna say I'd heard I'd heard anecdotally from business managers because I was asking what's going on that uh the the costs that they're incurring are kind of all over the place some are not incurring many costs right now they anticipate that might change some are incurring quite a bit of cost right now some are seeing some savings in terms of costs of not spending such as transportation costs and such others aren't so it's as Dan was saying it's premature it's all over the place I don't have any numbers but that's just kind of it's it's up in the air right now that's okay at some point something's got to come down to earth though yeah okay anything else we should know no okay thank you um everyone I think that's it for our joint meeting unless the Ed committee wants to stay on and hear about interfund borrowing no I think we'll we'll leave you but thanks so much for uh for this it was very I mean depressing but very helpful welcome to our world it was great having you Phil yeah it was why don't we just permanently merge the committees I'm feeling the love I don't know if you guys are yeah no we've been what we've been meeting with house health and welfare it if nothing else it helps the people that are actually doing the work because they only have to do it once right yeah right the thing is I don't feel I know you're joking a little bit this was in man wearings whole point the whole time she was in the house get ways and means and Ed in the same room well actually they did that when uh Shab Smith kind of uh right created a hybrid but yeah anyway thank you very much see you all thank you stay in touch and we'll uh