 Today, a special session is a little bit unusual, so we will figure out a way through this. What we've done is we've asked the administration or even the administration an opportunity to present its proposal. We wanted to do it in front of all three committees at once because the issues overlap. And we also want to be sure that we're going to give committee members a chance to ask questions. So we're going to start with a proposal from the administration. We'll ask you to hold your questions during that proposal. But then we'll make sure that we figure out a way to configure the rooms so that people can ask questions once they're done. I don't have much to add except welcome and this is a new experience for me and probably for most of you to have a special session and we need to figure out ways to work through this so that we can come to agreement. I also would like to welcome everyone and for our committees, the Education Committee, Ways to Means Committee and Appropriations Committee, please drop down the questions and even if they're clarified questions, let's wait until the end because we find even clarified questions take us down. It often takes a half an hour. So just hold all of your questions that you may want to drop them down. Thank you. So good afternoon and I'm not going to use a microphone unless people want me to. I find if I use a microphone I speak too loud and it's a little awkward but let me know. I'm happy with that. I too, this is a first for me, a special session and I'd like to acknowledge that it is a little bit awkward and what we hope to do today is realize our differences and come to agreement. But I'd like to start off on that thought and also acknowledge that we're not that far apart and we are close. The governor wrote a letter last night or sent a letter last night to the pro tem and to the speaker where he outlined his thoughts on the budget each 924 and the tax bill each 911. And what he mentioned was that they are good bodies of work. Like most governors, he may have made slightly different appropriations here and there, but his purpose was not to take issue with the budget for the tax bill. His purpose was to boil it down to one major issue that we have with the legislature. So in a sense we prefer to say we're very close to being where we need to be and all gets out of here. But we are here for one major issue. The governor has been very clear that he will not sign a budget or a tax bill that raises property tax rates on demand. And in a year that's realized about $160 million of additional revenue from the year before. And on that thought I just think about it when I was two weeks into my job and I walked into this building going to a joint fiscal committee meeting, need board meeting where we had to deal with a $28 million rescission. And it's all about where we got to find the money and how are we going to generate management savings and the like to come up with that money. We had some pretty tight fiscal times and it's, I don't know, seven months later and it is entirely different. We have additional revenue and some people might ask in that regard why we need to raise taxes at all. So, you know, in that regard we're going to present a plan today that does essentially two things. It uses part of a large pool of unanticipated revenue to hold property tax rates at where they are this year. And two, we're going to institute a long term structural reform that will allow stable property tax rates for five years at a minimum. Repay the transfer of the surplus mighties sent from the general fund to the education fund. And then use savings that we anticipate generating to reinvest either in K through 12 education, as we do today in the education fund, or in other components of the governor's cradle to career vision which would include head-to-head higher education for early care. The budget is passed by the House of Senate. It makes a choice. It takes $34.5 million and allocates it to Vermont State Teachers Retirement Plan, $1.5 million unfunded liability. The savings from which we will see in 20 years. So, the governor makes a different choice. He would use that same amount of money. And he would invest, he would allow that money to hold property tax rates, to prevent a property tax rate hike, generate instant savings from Vermont taxpayers, and catalyze the long term plan in the education fund that if this body so chooses can also be used to make payments on that same unfunded liability. So, what we're talking about when we boil it down is whether we're going to invest in education today, or we're going to let the clock keep ticking on a system that is really badly immutable for, and I think we know that in this building. And it's, you know, it's not just about the money. And what I'd like to do is just, you know, indicate that these charts should be familiar for any committee of jurisdiction on education. So, these have been seen before. This one comes from the Agency of Education. It shows you the student staff were even declining over the years. This we know from consensus forecasts on education spending and enrollment. This we know by looking at the history of healthcare communities paid by school employees. I think all of these will deal with the greater care of my colleagues in the administration. But I'd like to present to you the governor's plan, just three major components to it. The first is a one-time investment in the general fund. That property tax rate increase and provide a bridge to the second part of the plan, which are structural reforms to four major components in our education system. The acting secretary of education will deal with staffing ratios, the special education, both of which are very familiar topics in this building. And Commissioner Pechak will deal with statewide healthcare bargaining. And Commissioner Sanson will deal with property tax. And finally, from the changes that we will advocate more, many of which, again, have been dealt with in this building already. We will generate savings, almost $300 million on a net basis, which can then be reinvested in public education. We are not taking money from education and putting it elsewhere. We are generating savings that can be reinvested in public education. So from my part, from a budget standpoint, we would raise, we would make three changes to the current House and Senate past budget. The first of which is we would take the $34.5 million allocation to Vermont State teachers on funded liability, and we would redirect that to the Education Fund. Further, we would redirect about $7 million of Medicaid contingency that is put in there for fiscal 2018 to ensure that we have the money that we need to operate that program. And with five weeks to go in the year, we are highly confident that we do. And finally, we would redirect $2 million of an ed fund contingency, put there in case sales tax receipts fall short in 2018. There again, we are highly confident that will not be needed. A total of $43.7 million of money that we would redirect from the current budget appropriation to the Education Fund, which we would use to catalyze a structural reform plan. And I'd like to now yield to Acting Secretary Mouset to describe in a bit more detail what exactly we're talking about. Thank you, Commissioner Precious. I just want to interrupt to ask a clarifying question. I asked for a mission. However, I'm finding the... I'm not sure how our three committees are going to... This was a joint committee, so the rest of the committees are going to have to find this is an unusual setup for the way our committees typically have testimony. But I just need clarification on the $300,000 over five years versus $500 million, I'm sorry, $300 million versus $500 million at the reading since we've been out. It's $500 million over five years, so is the saving $500 million or $300 million? Because in the news it's been $500 million over five. It's the difference between gross and net. So gross savings we think are somewhere in the upper $400 million range. Net savings, which would include accounting for transfers back to the General Fund and deficits or differences between sources and uses in the Education Fund that we anticipate over the next five years. So when we clear up the operating gap or deficit and the transfer back to the General Fund, we're anticipating almost $300 million in savings. So it's a gross versus net. So at some point we need the chart that shows the gross dollars versus the net dollars. You'll see it, I'll see it. I thought that was the whole presentation, but it was one difference. Great. Thank you. So I want to talk about, I'm going to talk about from maybe a broader technical perspective. I'd like to echo Commissioner Gretchen's thanks and gratitude for the opportunity to get to meet as a unified voice and present the plan as a whole. So I didn't talk about why are we focusing so much on ratios in this plan. And I thought about this, I thought about this a lot. And I thought that first, the fact that as a parent myself, I can appreciate why any discussion of staff to student or teacher to student ratios might alarm many of our educators and the families and many members who support their royal schools. But I also know that as a parent, here's what I care about most regarding schools. One, is my child getting the best education opportunities for learning that she can't, she has to be a she, but she can. Is there equity across our community and state when it comes to all children learning opportunities? That's very important to me. Are my contributions, my personal contributions, tasks, physical or otherwise volunteering my time, are those used in the most efficient resourceful way possible in order to ensure equity in learning and ensure quality learning, excuse me, as equity? Why am I saying this? I'm saying this because in my professional position I'm using the same lens when I actually look at the proposal that we're talking about. So these are the same questions that underlaw my confidence in our proposed work on ratios. And when we have systems that we do have that are not set up to use resources in the most efficient way possible, and when we see growing inequity across our state when it comes to school offerings, right here in central Vermont, there was just a school that, there was a report that it's closing, that it's actually canceling or getting rid of all these athletics programs in order to stay up low. So no more athletics in any nature at this particular school. So when we see inequities like that in terms of offerings, educational opportunities for students that are linked with class size, and there certainly are very well documented benefits from having moderate class sizes in the 15 to 20 students per classroom range. I will say that it's really tough to find a lot of information and data on our situation, which is having pretty small classroom size and trying to get up to scale. Most of the large majority of work in the research domain is about when you have really big classrooms, how do you actually get them to what they would argue again is reasonable, which is 15 or 20. And so I feel like I have an obligation as your acting secretary to pay attention to this reality and to try and work towards solutions. I would also say just to remind folks, the focus on staffing, a focus on ratios is not new. It was included in Act 46 legislation passed by this body. It was discussed as a core issue of concern during the Statewide Educational Summit, which I know many of you attended. Education stakeholders in our state, such as the Vermont School Board Association, have identified work on ratios as part of their animal resolutions this past calendar year. And most recently, ratios have been included in this body's statute last session, requiring the State Board of Education to develop metrics for allocating small school grants. So I do want to make that point. And the other thing that I would mention is both the ratios task force and the special education requirements of the plan, thanks to your work, my understanding is are actually in bills and we're very grateful for that work that you've done. I just wanted to say that. We're also proposing a very collaborative approach. One that draws on the advice of both Vermont experts and stakeholders, as well as national and regional experts in topics like rural education, education, staffing, and the impact of social problems such as poverty, and opioid addiction, and trauma, and its impact on school and communities, which is really critical for our state, as you know. And we also are pleased because this approach at the end of the day relies on our local decision makers, the school boards, and the education leaders at that local level to have final say over what happens in their region. This isn't a mandatory top-down approach. We heard out that that was not in favor of that and clear. Through the work of the task force, we are also, though, planning to provide specific tools and technical assistance to the field that will then help the local systems increase their efficiencies. And therefore, we believe, free of resources they can use to improve quality equity. And this aligns with Governor Scott's critical to career vision for Vermont's education system. You know, I think it's only responsible of me, as well, to point out that as a state, and many of you I think already know this, we have the highest staffing ratios overall across the nation. Our student numbers, as these data showed, are steadily declining, and they're going to continue to do so by all projections, but our education staffing is not keeping pace with this reality, and this just doesn't make sense based on pure logic alone. We need to really think about that and consider that. At the end of the day, we're talking about re-hiring four out of five, or not necessarily re-hiring, but leaving alone, four out of five positions that have been freed through voluntary attrition, retirement or voluntary leaving. So I don't think that this proposal is about large-scale layoffs for those kinds of activities. I believe our proposal presents a balanced, achievable approach that we need as a state in order to best purpose our educational resources and ensure quality learning. Thank you, and I'm now going to turn it over to Commissioner Peechak. Good afternoon, everybody. I'm Mike Peechak. I'm a commissioner at the Department of Financial Regulation, and at the department we regulate the Beehive, the Vermont Educational Health Initiative, which is the entity that provides health care to teachers through its membership in Beehive. So that's the component to which we're here to talk about, which is the health reform aspect of the governor's larger five-year educational plan. So as you'll see in the materials that have been passed out and has been briefed, there's been a lot of that within the five years. $62 million of saving that has been achieved if the following happens. A statewide negotiated benefit is established. There's a transition period to get us to that negotiated benefit where there's guardrails in place for a number of years before the benefit is actually fully negotiated. And then lastly, the entity, Beehive, remains a risk-bearing entity controlled by a majority of members, which means school district appointees are elected officials. So if I could just talk a little bit about the statewide health-negotiated health benefit for a minute. I think all sides are pretty close on this one. The bipartisan commission that was established by the legislature last year recommended that we transition to a statewide negotiated health benefit. They found that there would be savings from a cost perspective, but cost savings to taxpayers. They found that it would be more equitable in terms of the types of benefits that are provided to teachers in every corner of the state in terms of consistency and equality. They also found that from an actuarial standpoint, from a grading standpoint in terms of health insurance rates year after year, it would be easier to predict and they'd be more stable and it'd be less likely to fluctuate as the graph behind the illustrates. So that is something that this bipartisan commission recommended. We also saw maybe six weeks ago that the NEA membership in Vermont also voted to move to a statewide state-negotiated health benefit as well. So again, I think this is an item that we're particularly close on. It's just a matter of how do we transition from where we are now to the statewide level. So when you're talking about a transition, there's a number of components that are important. Of course, who's the bargaining unit? Who's doing the negotiations between the two parties? What is the timeline? There's a very important timeline in insurance in terms of getting the rates set for a particular year and all of the work that has to be done to get the rates of that place, including actuarial work, including review by the department, and then getting the plans ready and educating the teachers as to any changes that might happen in the plan. And then impasse procedures are very important. What happens if an agreement can't be negotiated? Similarly, other issues like gratification and whatnot are other issues as well. So what the governor's plan proposes is to build in a statutory guardrail for the first few years as a commission is established to work out all of those details about how this will be negotiated at a statewide level. Just for an example, the state of Washington moved to a statewide negotiated health benefit for teachers. Their projection is, I think, three or four years to get to a place where it's actually being negotiated in 2020. So there's an example of that that we heard from the commission at least in the state of Washington. So what that helps us do is also ensure that the savings we're talking about are locked in. The governor's plan is an 80-20 split with very high contribution in terms of a health savings account. So teachers would continue to get very high-quality health care and continue to be very affordable in terms of both the high deductible plan paired with a health savings account that's well-funded. So I just want to mention that distinction between a health savings account and a health reimbursement account, which I think is important for people to understand because that is the large part where the $62 million is derived from. So the difference generally is that a health savings account, HSA, is owned by the employee and it transfers with the employee whether they go to a different job or retired. They can use this money in the retirement. They can use this money in a different employer. The HRA is employer control. So monies that are not used at the end of the plan year revert back to the employer. There's sometimes rollover features in an HRA not to get too complicated, but we don't have those in the plans that have been negotiated in the state of Vermont so far. So basically the two options are HRA, you fund the amount that's not used, revert back to the employer and the amount that's not used remains with the employer to use over time. So one would might think that if you use the HRA and monies go back to an employer then that might cause savings from an employer's standpoint. But in fact, actuarial studies that DFR confirmed and that was conducted by VEI in connecting the rates this year show that it actually incentivizes utilization. So if you have $2,000 this year to use and if you don't use it it's much more likely to seed out health care for yourself or for things of that nature but you're also much likely to go to the pharmacy and buy load up on bear aspirin or load up on ACE bandages or load up on things that you can get for the year ahead. It's much more likely to incentivize utilization when the money's revert back to the employer. On the HSA, it's much more likely to create better health outcomes in terms of decision making. So if you're in this room for something you might go to your primary care doctor you might go to the urgent care so you make better choices in that respect and then also you're not incentivized to overspend when it comes to trying to stock up at the end of the year on pharmacy benefits and what not. So we have a real live example of what happens when you go with the HRA versus the HSA. Blue Cross Blue Shield had anticipated that most districts would settle with HSAs in fact only one district did as a result of that premiums in this year's plans went up approximately 7% that was dedicated solely to that issue it went up 16% overall it was bought down to 10.2 but 7% of the rate of release was due solely to the fact that these plans settled with HRAs instead of HSAs which is considerably more common among employees and employers. So as a result of that about 11.8 million dollars of savings were not materialized or not recognized and Blue Cross Blue Shield had revised their actual real numbers and say the premiums actually have to go up by close to 12 million dollars because you settled with the HRAs instead of the HSAs. So when you're talking about where does the 62 million dollars come from it's a derivative of that. If you use as the governor's plan proposes well funded HSAs you're likely to get back that 12 million dollars that was an increase in premiums. The governor's plan has a conservative estimate of 6 million and then builds on that over time as it builds up to the 62 million. So that's sort of where those numbers come from it's a little complicated I'm happy to answer questions about it. Then the last point I just want to make is on the structure of VI itself on the entity that bears the risk provides the insurance. Somebody asked me the question of is VI self insurance and in a way it is self insurance it's a risk bearing entity. If it doesn't have money to pay the claims it can be paid or taxpayers are going to be asked to put a much larger bill able to get claims paid for individuals but that is a terrible outcome. The solvency of all of our regulated entities is number one focus at DFR. Ensuring that insurers that are making promises are able to make good on them. No different in the healthcare context and no different in the VI context. So when we're talking about governing structure the department has had a three decade old regulation that requires the board of directors to have a risk bearing entity whether it's VI or any other risk bearing entity to have a majority control from the membership and in this case the membership are the districts and this would be appointed or elected officials. So we think that's very important to align the risk of the school districts with the risk bearing entity. They're the ones that are ultimately going to bear the risk and they're the ones that would make decisions appropriate for the solvency and ensuring that teachers get their claims paid and that there's no risk of that. So the point is that this entity VI is in charge of setting rates it's in charge of planning they're doing the plan design. Both of these things are traditional employer functions and they're also professional and actual reality driven. So it's not something that's set up well for negotiation. In fact we're concerned if it were set up as the senate education proposal was as a 3-3 that it could have caused paralysis and disagreement and discord on the VI board that would impact its operation and potentially could impact its solvency. So with that I will leave it there and answer questions later but turn it over to Kai Samson. Hi. Hello again everyone and welcome back. I wanted to start with the why of and this is all in your your paper too so it's difficult to see but you know on the property tax side you know why why is the governor trying to avoid property tax increase and it's not just about this year in front of us it's about what we we've computed the trajectory a five year outlook of property taxes will look like and that's in this chart here that shows our trajectory and I think importantly shows us what to me is really important to emphasize is that a mere eight years ago in 2010 your statewide average homestead rate was $1.23 and your non-res rate was $1.35 and here we are just years later talking about an FY19 increase to $1.53 and non-residential to $1.59 and that's on the rate people are paying more property taxes every year businesses, homeowners just because of the increase doing in addition or just the CLA which most of you are familiar with the increased value of their home just like if we're all lucky we'll earn a little bit more money this year over last year our rates stay the same hopefully and we'll still pay a little bit more taxes because the base fills up what we're being taxed on but what's been happening to the Vermont property tax payer is that the base is increasing not as much as we'd like into the last years the grand list growth rate was only about 1.1 or 1.4% but the rate has also been increasing so it's a bit of a double whammy and our projections show we have favorable grand list growth numbers, joint consensus coming out of the economists in the next four years and that's why you see these two bars that kind of spike up and then come back down if those projections hold we have better days ahead as far as our tax base but what we'd like to do and what this plan is really about is preventing a property tax increase this year and setting us on a sustainable path so we can not experience these two peaks and hold rates steady and if we can do that the property tax increase over the next five years that we will prevent on Vermonters both non-residential and non-residential amounts to almost $300 million over those five years so that's really what we feel is a compelling reason to act and I think knowing the other charts you've seen enrollment of staffing of per pupil spending we need to take a five year approach and I'm hoping we get out of this building soon with the acknowledgement that looking forward a five year approach and preventing these unnecessary property tax increases I think that should be a shared goal and so I just wanted to start with that what's kind of driving this the next exhibit here is impossible to read here and probably equally impossible on print out but for those of you that have reading left but this is an education fund outlook essentially with no policy changes and I know you're hearing from JFO next each of these items that JFO has looked at this analysis that my staff has done I don't believe there are any remaining objections to what this shows us and what I want to draw your attention to I believe is line 13 the projection here holds or forces mathematically the non-residential rate the residential rate to hold steady at $1.50 wherever it is now excuse me $1.50 and $1.55 and what that results in is a new line that most of you are familiar with the education outlook you work with it throughout the session but line 13 adds a new line which is what the gap is so if we were to have a shared goal of not increasing property taxes on Vermonters on an annual basis what is the gap that we need to fill and that gap is the difference between revenue sources and expected uses assuming no property tax increase rate increase so that gap carries over to this exhibit which is a little bit cut off here your next page that shows all the different savings initiative that you've heard about and we've added some from the work that you guys did I think we are very close to getting into the same place here but each of these shows you over five or six years what we estimate the annual savings to be and that gap that I pointed out line 13 in the outlook is carried over here to the third from the bottom line and this goes to Representative Toll's question the total savings versus the net savings these initiatives or interventions that we have suggested each stack up to the blue line year by year and provide gross savings but we need to reduce that gross savings by the gap we need to hold property tax rates level and then we have to further reduce them by our commitment to pay back the one-time funds which happens in FY 22 through 24 but I would say that for the administration's plan we're not necessarily married to any timing of payback schedule but we do we're going to use one-time funds and the education funds to pay it back to restore that to the general fund where the one-time money is sourced so when you subtract those two negatives from the gross savings you get the net savings and you can look at those going across by intervention or initiative or down at the bottom by by total by year and that total column or the green column the net column is where we arrive what I think is a great opportunity for us to think about what I really think are modest changes to ratios to staffing to you know per pupil spending will grow under this 5-year plan total education spending will grow this is not a pull the rug out from under a school as planned this is very modest changes and I believe after 5 years we will see that we are still number one in the nation in investment per pupil and we still be number one in the nation as far as our staff to student ratio so it's not you know by any means or any stretch of imagination a radical transformative reform plan that's going to change education as we know it it just shows you when you're dealing with a $1.8 billion fund when you make modest changes you can produce big savings I know one of the questions well I'll just leave that for the question so that's kind of how we I won't anticipate your questions I don't want to do that so I think I'll leave it at that well let me just emphasize that even though I can't even read that but you know several weeks ago when the governor put forward this plan and way back even to the January memo you heard about some of these items what we've done here is work off some of the things that were in 9-11 out of conference there was an additional income sensitivity change the original one that started way back was dropping the maximum house side value from 500 to 400 eligible for property tax adjustments or in the calculation we adopted that with the plan that was released several weeks ago and we also adopted something that came out of conference which was for $90,000 in income and higher dropping from $250,000 to $200,000 however that has much more far reaching impacts than the $500,000 to $400,000 which is only about $2,000 per month and the $250,000 to $200,000 affects $21,000 per month and we think with the availability of money we have this fiscal year and expect next fiscal year that it's appropriate to defer that change to FY20 but other than that we accept that that policy that came out of conference in 9-11 then the excess spending threshold I believe that has not received any objection or from the Joint Fiscal Office as far as those being reasonably computed savings and again I think we've been through this in several of your committees but the excess spending threshold is currently 121% of what's a proxy for average for people spending we propose to reduce that to 110% over 5 years and that was in the plan several weeks ago and was also rooted in something the excess spending threshold was one of the bullet points in the January 18th memo and that is unchanged at this point so we continue to think that's an important piece to work in long-step with the target and you've heard about the other areas from Deputy Secretary and Commissioner so I think I'll leave it there maybe some closing comments at and then we can take questions Sure, we're happy to take questions let me just close by saying that so we heard I'll say something new and the not new part of the various ideas that we've discussed many of these ideas have been circulating in the building for years we have no pride of ownership over what we've done is we've put these ideas into a cohesive package and we're asking for action on those but many of these ideas should be very familiar to people but what is new and what is different from my previous years here is we're taking a more proactive approach to managing the education fund and the education fund is the largest source of state funds it is larger than the general fund and the transportation fund combined we look at the state's money and we don't manage it, it manages us and so we're trying to acknowledge that and take a much more proactive approach to that and the governor believes we need to do this to not only achieve success for our children but also to achieve success financially for the state so thank you I think this is as I've noted a little awkward to help here but I want to be sure that we give that we give people a chance to ask questions so I think what I'm going to do is ask if you all would cover over there maybe David and Kitty and I can stand up here and manage the questions in some way or another so yeah questions perfect and if you don't mind standing up I think it would be great because I'm not sure okay so what wants to answer this question so for a lot of us here one of the problems with the current system is I think anyway reconnecting voters to the vote for the study and there was concern in previous bills about that we might be creating capacity for more spending in this proposal if we in the five-year plan if we are keeping tax rates stable or level in the next five years are we not creating more capacity for spending over those five years if voters feel like if we're inoculating them for the spending decisions by saying whatever you're doing we're going to keep the tax rates at that level does that not create more capacity than what we're concerned about in the bills there are several parts to that question I think the capacity question is with the excess spending threshold that's a pretty effective tool currently keeping spending there's a lot of spending in the hovers below that and we're bringing that down to 110% over 10 years I think your question on capacity is if we generate these savings will the capacity just be eaten up elsewhere or the net savings I think that's generally the idea is that we have a net savings number that could be invested at the local level or also in early education or higher education so I don't think to the extent it creates capacity that's a good thing because under a stable tax environment we're showing two terms of net savings I'm not sure if that gets to the capacity for more spending voters think that their tax rates are going to stay level compared to how much they voted in the budget so so we're managing towards an average statewide homestead rate well it's not an average as they said non-residential rate so even within that I think JFO just published an analysis today that shows that even under the governor's plan tax rates, many tax towns districts are going to see their tax rates go up that's because of the spending in their district that's because and more refined at the individual level your household incomes are 70% of our monitors are income sensitized so that is a huge complicating and difficult factor of track but people's individual taxes are going to go up or down in regards to poor people spending going up and that's part of the problem that you can actually talk about we had another government address back then thank you a couple comments a quick question I'm talking about the $62 million that's saved by looking to an HSA that's only if you negotiate to the model of money put forth by the governor and this would be a hopeful outcome actually and I think Commissioner Stanton used to mention that as property values increase property taxes go up and I don't think that's true if you're raising money as your property values go up property taxes go down you're still raising the same amount I think historically as McGrath showed that hasn't been the case the rates have gone up up up theoretically when it comes to a re-appraisal yes and I wasn't specifically talking about a re-appraisal which kind of levels sets that unity and changes their CLA I'm talking about just the management growth and the full values and business values but my question is you talked about the ratio of task force providing tools and districts to help them get to where they need to go could you provide any examples of what these tools are that the districts currently don't know about well I think that there's variability I think some districts are some districts this would probably make sure all the stories come out so what we want to do is actually look at different configurations of structures so for instance we know P-12, P-7-12 a lot of different structures that are happening do we have 46 we want to be able to talk to those different structures and actually say here are some questions that you should be thinking about as you actually transition so think about who do you have a strong sense of that's getting close to the tire who have a strong sense of that might not be coming back home and also over the next four years and here are a set of questions that you should be asking yourself around how do we use if I could just make a point of clarification about the negotiation piece so all of the bipartisan commission has come out and said that a state-wide negotiation benefit is a good option for the out there and the equitable health care across cities but the Governor's plan is that it's a transition to that over a number of years so it does lock in an 80-20 well-funded HSA over a number of year period to achieve those savings so it's not until the out years when negotiations would happen once all of the decisions are satisfied by the end of that procedure that the time is used by doing the food so the savings would be locked in would be a good option Maureen thank you just small specific questions I would you say that you would just play with the thought about how our positions open in the agency no I wasn't talking about agency influence at all today okay verify that so we're talking about natural attrition so folks who are going to retire in a voluntary way of those over the 5-year period 4 out of 5 will continue to be positions that open within the agency no at the schools but that's really important because the agency budget has nothing to do with the effort if I declare and that's what I needed to be sure and you said I'm like oh my thank you well no go ahead Mary or George so a request and a question my request is could you please show us your work so you're making assumptions and the chart that shows that the government should work to summarize it and do a signed dollar to yours and at least this morning in the preparations we tried to figure out the dollar that was associated with the health insurance so we couldn't get where so we would like to see not just a a number but how we were alive and similarly with the transition to the statewide bargaining we can hear a few approaches which I assume can help with bargaining again we would like to see that necessarily student staff, ratio health care and the third one is the transition to the special education payments we certainly have heard that we have to have an effort the requirement now we will be losing the level and we will be showing the state that we are going to use the right to seek the work so if we could have that that would be the work my question is in the presentation we've heard I've heard a mixture of our goal is to have no tax breaks or to have no use for any property taxes would you tell me which one is our goal no increase in the statewide and the average tax rate which is in fact an increase for a lot of people just to be clear so the goal is a lower tax rate but clarification on that I do hear different things we understand the governor's proposal it does have a tax rate increase for 127 so that's but totally aside from whether there's a tax increase whatever the rate is if the base is larger then you get an increase a liability increase so to clarify that average statewide tax rate increase which is computed that does always seem to be a doubt so when you say that you want to hold rates where they are this year when you sign a budget that raises property tax rates that's not what you mean average state with rates will be the non-residential rate and the average homestead rate so people who live in 127 towns are going to see a tax increase and that's okay tax rate increase we're not proposing because back to the capacity and the connection of voters we're not proposing to more than the average for people spending or the yields should not feel a higher rate so yes those natural variations will continue we are focused on holding the average statewide homestead property tax rate and the non-residential tax rate but it's not just high spending towns that would see a tax rate increase it's any town that spent more in fiscal 19 than in fiscal 18 but there were low spending for a people basis is that right I believe so I wouldn't question that analysis because there is great variability in towns and I think you would agree that it would be almost impossible to guarantee that no one's taxed we've asked for an analysis of what that would actually cost if you actually kept everybody's tax rate level I think that I don't have a figure but it's obviously an awful lot of money a lot more than $58 million but that's not what you're talking about correct so I want to piggyback on that is that right before we move on I just wanted to answer representative speakers on special education the reason made this effort is to give you a guide that's a good one I want to continue on the same topic that we're on regarding tax rates versus property taxes because vermonters will feel at least 50% of vermonters are normal including property taxes even if the rate remains the same their taxes could increase and if you look at the analysis that J-Fo has put out it conveniently puts side by side kind of 9-11 and consistently the difference is on the same community with the governor's plan they're not going to hang out in confidence and that's kind of consistent with the average tax rate that we're trying to prevent increase but what I want to understand and making sure we get to the end game that nobody is surprised because you mentioned the governor's letter that was sent to House and Senate leadership today and on page 3 of the letter before I read my line you're knowing the average tax rate will remain the same however some tax rates will increase and some vermonters will feel a property tax increase that's correct but in here the governor has said but again I will not sign a bill that raises property taxes and his own proposal some vermonters will see a raise in property taxes and so if we happen to just put his proposal forward does this mean he could not sign his own proposal as it says yet again I will not sign a bill that raises property taxes to also repeat what Commissioner Sampson said we're referring to an average statewide rate so if 127 towns realize a property tax rate increase presumably depending on the size of those towns and the magnitude of that increase some 127 towns or so probably realize a property tax rate decrease if you're dealing with averages so that's what we're dealing with and to get to a question that was mentioned earlier we're not trying to short circuit the connection of a voted budget with the tax rate that's there we're not freezing every tax rate across Vermont we're freezing an average statewide rate and we still hope that the impact of a voted budget will have an impact on the tax rate but I need an answer to the question because if I'm going to come forward I think we made it very clear it's the average homestead tax rate property taxes that is a broad term what the governor means is average homestead property tax rate and a non-residential rate you can also see it on the operator statement by the way do you think that's clear it's not there do you think the public understands that their tax rates impact the towns and therefore their taxes are going to go up I think what they do understand is that if the average tax rate under 9-11 goes up 2.6 cents that there will be some connection to that in their town so it's going to be probably that proportional amount more in their town versus what the governor says nobody asks do you think that they understand that the governor's will result in increased tax rates and increased taxes in what we have for towns I'd have to say that I'm I think that statewide we have a problem with voters with only 20% of them showing up for the town meeting understanding you want me to I don't know I don't know and I think certainly this testimony will make that clear so I'd like to switch gears for just a minute to Beehive I think it's important that we all have the same baseline before we try to give and you continually refer to teachers do you mean teachers or do you mean school employees so Beehive currently offers teachers and their son and their school employees so they will be referring to school employees the other thing is that you said that the Beehive Blue Cross Blue Shield estimates for spending were based on HRAs we had testimony at committee that you said that the estimate the reason that the rates were not so much was that the estimates initially were based on HRAs and HRAs you said HRAs regardless we took testimony that it was based on 50% HRAs and 50% HRAs that would have given about 90% of this year's average rate and then my last is you said that you didn't argument that it should be the governing body should have more management type of owners than employees and yet your proposal you said you implied or said employees have no risk involved and yet the proposal using HRAs and HSAs actually shifts significant risk to employees so I just wondered why you said that there was all the risk was on the management side where the proposal from the governor has a significant risk being shifted to employees so there's two different types of risk one people are talking about the risk bearer that would take all the premium trade all the premium to the risk bearer and then they take all the plans separately under the high premium plans that were transitioned to a year ago so the premium that went down considerably however there's now because I thought the plan now the help the design to cover that increase so that they will remain neutral so there shouldn't be under the proposal that we're proposing nor under what happened with the transition that's already occurred any risk that's actually shifted to teachers the risk should have been nullified by the increase but the premium risk of the risk bearer and the Israel and that remains I'm hoping I heard something misunderstood something you said you said that these savings are locked in during this time frame until we get to the statewide bargaining by doing HSAs yet all but one of the negotiated settlements used HR are you saying that the negotiations are about to oppose without negotiations those folks who negotiated HRA are going to have to switch to HSA well I think the answer to that is that there's two components there's an 80-20 split that would be locked in the statute and there would be the HSA with well funded amounts so both of those things would be put in the statute your locking those in the statute without negotiations is what you're saying of course there's a legislative process to deliberate over that so it wouldn't be imposed on anybody but the legislative budget but it's not so with that I would say that these are fictitious savings and that's an absolutely unacceptable proposal the other one I want to ask about is your excess spending will go down to 10% so we have a lot of variation in our various school districts and how did you arrive at 10% as being the maximum acceptable variation in spending education spending when we have some districts that are very small some districts that are very rural and have lots of transportation costs how did you arrive at 10% as being a rational number for the variation in spending you know from my involvement in that it was trying to you know choose a number that allowed some variety for those factors and I think that the task force will also tackle some of these rural versus urban district issues but ultimately bearing in mind that with this variation in cost there is a lot of cost shifting that goes on you know I think analysis shows that when you are a very high spending district the tax rate impact that you then collect from your from your grand list and you know it doesn't actually compensate for the spending that you load upon the ed fund essentially so the lowering of an excess spending threshold does not say you may not spend more than 110% but it says when you spend an excess of 110% there's an additional tax penalty for that but I did not have in fact I don't recall what got us to 110% to be honest can anybody else answer that were you going to add to that we looked I couldn't see you I just asked if anybody else could answer how how the administration came to this excess spending threshold of 110% as being your rational number we looked at various configurations that you're aware we've dealt at length with the excess spending threshold and one of the considerations we had as missioner mentioned before was how do we change our funding mechanisms so that towns that spend additional dollars are paying for those additional dollars and so at what level do we turn roughly what it is today about 45 cents on the dollar of extra spending into 90 or 95 cents of extra spending one way to do that is by lowering the excess spending threshold and another way to do it is actually what you debated in committee and passed in 911 by lowering the yield there are different ways of doing it 110% versus 115% that's where we found that the additional dollar would be broadly equal to lowering the yield down to 45 to $5,000 I just want to continue on the excess spending threshold I'm reading the chart correctly I believe and I'll look at my committee member that we pay about $3 million now is about the cost that comes in from districts that are paying the excess spending threshold isn't it about $3 million I think that's what we needed to find to get rid of the excess spending threshold so my concern is because I live in the northeast kingdom where we have those small schools that sometimes are very high spending because of the use of their location not a lot of kids living in that part of the state and I know it's a huge burden that if they could just lift that excess spending threshold off their backs that they would be in a much better place passing their budgets in town and when I see it going from $3 million in 2020 to $19 million in 2024 I'm just thinking of the additional burden on these very small towns in my area those are the ones that I am most familiar with going from $3 million that we're capturing from those districts to $19 much of their characteristics they can't make the changes because of the characteristics of the school the location, the population the number of children with need and so I just feel it's a huge burden and I'm very very concerned by lowering that threshold and the one school I'm thinking about a school board member was so excited to read that because they read in the opposite way thinking the penalty was being reduced and I said no, no, no the threshold is being reduced and so I think that I would like to learn more about the schools that end up being targeted and it's the ultimate goal to close these schools because the ultimate goal is to close the schools put the policy in place and let's not dance around I'm not advocating to close schools but why do a slow death let's put the cards on the table because that is a significant amount of $16 million more out of those very financially troubled areas is going to be a killer and I'll just point out, I mean it's a good question and good point that that's not $60 million more on the exact same districts it does broaden the districts that may either manage under the excess spending threshold as it reduces or pay into that and I think maybe the acting secretary would have some thoughts on viability of schools and quality and those type of issues but remember as far as coming to the table and just deciding to close schools there's a lot of communities that say we know our school is expensive it means a lot to us and we want to keep it open and we're willing to pay for that but they're not willing to pay penalties they're willing to pay for the costs but I've heard loud and clear from my communities don't give us a penalty let us pay for our schools and there's a big there's a difference there there is a difference but at the end of the day things like the steepening the yield under the back calculation achieves a similar end without calling it a penalty but at the end of the day I think all of the ideas that were on funding formulas this year somehow do try to dissuade high spending districts from spending at that level and bring the net money that comes into the ed fund for districts that continue to spend at that level or increase spending to increase the money that they pay the ed fund for that so maybe some of that issue is a labeling issue whether you call it a steepen yield or a warranty for a penalty I think we're getting to similar places the only other thing I would add is that for some of these smaller schools depending on what happens with Act 46 and a final plan they might have different opportunities that they're not thinking about at the moment so I would just put that out there in terms of you know what you did is actually talk about how these are just particularly school districts that are broader in terms of you wanted to do a clarification there yeah there's just one clarification that's represented in terms of the negotiation and the clocking it into statute I just wanted to be clear that the years that we're talking about are 20 and 21 those are years that have not been negotiated yet so something wouldn't be imposed that was negotiated for we're talking about how years that have yet to be negotiated for so during that transition period is when the statutory guardrails would be in place thank you for that clarification but you're still talking about taking away bargaining rights on a temporary basis on that one particular and the administration thinks that's a good idea to take away bargaining and transition bargaining and transition thank you thank you Mr. Chair many of my initial questions I guess have been touched on although I guess I'd say the answer has been certainly circular but I'd like to talk about two kinds of assumptions that troubled me quite a lot what is the governor's proposal that we could do based on your sheet it starts with an assumption something assumed tax rates going out five years and it seems very clearly that a lot of the in-law proposals working way down through your sheet are very much interlocking and if the assumption at the bottom of the page may work but as we've been aware here assumptions about healthcare, assumptions about special ed, assumptions about sorts of things if they don't all fall into place the way you've arranged the math then this doesn't work but broader than that it's clear that the governor's proposal assumes that there'll be no recession it assumes that grand list will continue to rise at a predictable amount it assumes that conversations and tools will lead to a thousand teachers being gone five years from now there's a lot of things over which we have absolutely no control maybe there's some control over teachers' retardments but certainly not in this room but there's no control over what's going to happen in Washington and my problem is if you're projecting out five years presumed savings you're basically going to spend it now where the age are we going to be when things don't go as point I mean really so I think there is a lot of variability in any forecast but just because of that it doesn't mean we don't forecast with full recognition that anything could happen in DC anything could happen to the economy the consensus economist forecast on the grand list could not come to be all those things totally acknowledge but I think the value in forecasting is still there there's no guide than none secondly this is not a five year plan to your last point we don't spend all the savings in year one we've got 43.7 million of that money necessary to prevent the tax increase in FY the tax rate to increase in FY average statewide almost the tax rate increase not residential tax rate increase in FY19 and as a proxy for that going forward I will call that tax rate increase and that's 43.7 million on a plan that yes it's a forecast it's five years, six years for some of the proposals going up to 24 that has net savings approaching 300 million so we're not spending it all in year one we're spending money in year one that we have that is excess money that was not budgeted for and so and the other piece that I wanted to mention on your comments which are fair you know forecasts are variable is that we're not proposing that we do this that we set ratio goals and then walk away we will be back here you all will be back here most of you in January and we will have you know five intervening legislative sessions to check in on this plan and check in on these goals and see what the task force has to say see what we're extremely encouraged by you know what school boards did with their budgets based on attention a summit, a fair warning about what the trajectory of the average tax rate was going to be and we think that spirit can continue if we can all get together and focus on things like ratios and especially folks just to follow up one moment alright thank you just being a little bit serious at the same time the secretary ran with blinders on but he was a lot more fleet of foot than the rest of us the rest of us are looking beyond projections and hoping that everything will come out right what you call savings surplus money is for many of us in this room absolutely necessary for other talks and we would have the legislative ability to you know 80 million shows up in year three of this plan of net savings there will be options on the table put money to the additional money to the teacher's pension lower the rate do something in early childhood or a high rider ticket is what the governor's goals are for that but it's a legislative body that's in a different direction with it can I just add a piece to that I think it's important also to point out we hear a lot about well the ratios aren't going to happen they're just not going to happen and I think it's important to point out that there are many local educators and leaders who are actually looking forward to having this kind of a task force that they can actually make some hard choices they're actually with some leadership and they're also very eager to hear about the task forces work on the barriers right now that actually make our staff to student ratios so out of sync with the rest of our nation and also the rest of local areas and I think that's really important to point out I'm sure people with questions still there's been a little bit of talk about the joint this along this analysis that we're going to hear shortly so it sounds like you're familiar with that do you agree with their projection that if the governor's plan would be implemented fiscal 19 127 communities would have a tax increase you know I just looked at it on my phone before testifying today but it doesn't surprise me at all again because we're dealing with an average property and with any average there are you know ones above the average and below the average but I also would like I mentioned earlier see that the last column is showing the variance because the governor's plan and what 9-11 coming out of conference does and it's clear that the governor's plan because it prevents the average from going up also in those same districts where because of poor people spending or whatever is causing that rate to go up that it goes up even more under under what past at a conference so but I think I think I will take a look at it and we'll let you know if we agree but I'm quite confident the math is probably good so I have two questions one is for tuition aggression that you're projecting $526 million in savings and a $1.5 billion budget that sounds like roughly a 30% cut to education is that correct? I think that's a gross number and over five years but you know as I said earlier this money is not intended to come out of education whatever we save this body will have the opportunity to re-invest so it is not a reduction in funds to education in fact it could end up being more funds because keep in mind we have growth in the grand list and if we re-invest the savings that we generate in the education system we'll actually have more money in education by the end so just to be clear it's not 30% up because it's the total over actually six years in that so you have to pay six times 1.8 billion and take five years percent of that basically 100 million a year maybe my other question is what so some school districts in this state tuition students what controls are there on their spending on their ratios so that we see some school districts are spending tuitioning $20,000 for people and where that affects the average tax rate on the spending on the education right boards have the option in towns to determine tuition rates there's no law that says a school board has to determine that this is the tuition it will pay for the students so we encourage boards to be thoughtful about the amount of tuition that they decide that they will pay for students but for non-operatives parents would make up the difference for those kids to go to those schools or the schools will work with the school boards but this that is not part of our plan but that's the way it works today I don't see any reason why I wouldn't work that way in the future there's an average now tuition thank you first thank you all I know on a normal day you all have incredibly challenging jobs and this is not normal but I want to focus quickly if I may on possible unintended consequences or perhaps their intentional Adam you mentioned at the beginning to be a presentation I think you mentioned you had identified $7 million in the Medicaid area that you hope to bring towards this issue is that correct it was from a contingency where surplus funds were used to create a contingency in case the Medicaid program came up short okay so is that in other words translate that as utilization down and you're going to end the years positively actually drug rebates are running about $10 million and Plains History is running about $7 million cold so with 5 weeks left in the year thank you we've got a question and I and many others look at the 52 points of light and where those savings are identified inventory just be careful in that number is a fairly significant amount of money that has been targeted for long-term care it's been our practice since 1996 with the passage of Act 160 to roll those dollars over because usually they are the result of reduced nursing home spending which is our policy and if the dollars are taken away the community and family supports to help folks stay in their home will be diminished and we might see an increase in the nursing home Medicaid line item I just wanted to make sure you were aware of that when we are go back thank you I didn't want to you in accidentally to scoop those dollars and it was nothing accidental about the allocation okay well good to know that to okay acting secretary thank you I'm worried that these policies we're crafting are intentionally aimed at reducing our small schools and that is troublesome to me rural economic development in Vermont the face of our communities will change dramatically try to sell your house another family in if you don't have a school it has a deep impact on our communities for a small school footprint it doesn't change the building even though the number of students over the years may still need the janitor there are fixed staffing and there's variable staffing and just because of retirement by happenstance if the science teacher retires somebody still has to teach science it's not apt to be the gym teacher there are pressures here and assumptions that probably so I guess and forgive me for going on too long is it with the tensionality that you want to close our small schools it feels that way to me so I would say no that's not what the purpose of this planet there's no part of this plan that has a feature about closing small schools and again it will be up to the local school boards in terms of what they want to do with their ratios under this model I really appreciate the conversation about small schools I also though have seen many small schools that I really worry as our acting secretary that students are being short changed because they don't have the same opportunities that other students do in places that have actually looked at different ways to you know either consolidate government structure or find some other creative innovative ways to actually have more regional approaches and I don't think that what we're talking about is all that different from what's already going on in terms of Act 46 and in terms of as I said at the beginning other conversations that have been happening in this in this body for the past five years okay I have two questions first thank you all for your work the first I have to say as both of them are on tax payer and as a legislator one of the things that was exciting to me about 9-11 how it was passed is that I began to look at doing some reform to the Ed Fund and so I am interested to hear from you rationale of why the administrative proposal continues to keep general government spending in the Ed Fund that's not related to education and then my second question I have to say it's ghastly for me that we have an education funding outlook that has predicted $250 million shortfall so I'd like to hear some more details on how we plan on making up that gap so I would like to take a start at this one I would like to testify on the conversation that I've heard having this session on what are considered to be education costs or not and I know that some of the concerns were around adult education I'm not sure that's what you're talking about I will say it for me specifically if we need to and then also I'll read an example other two that 9-11 does cover is education literacy in community high school but the other two so it's the last two that I'm going to talk about I think it's very challenging for those who are in those those are in the trenches working it's hard to hear they're not part of our K-12 system and what they're actually doing is ensuring that students get their high school diploma so I think that's really important I can see where the idea of it is not having physically as a school it means it's not education but the ultimate goal is to actually get students diploma which is the absolute intent of our entire system it's important to know and I just have to confirm that what we're proposing does not alter any of the things that came out to Congress and 9-11 as far as the funding source changes or we brought in and out of the ed fund but I think that's another area where the governor and the administration wants to focus on the average property tax rate increase and accept certain things we look forward to some more analysis on what it does to the ed fund versus the general fund but as far as the proposal we're here to discuss today it accepts those swaps and changes if they were included in the outlook the outlook is a baseline no policy change outlook I'm sorry that wasn't good that's kind of and then I'd like to hear more about where the $250 million shortfall is going to get paid out right so the $250 million shortfall is a proxy for another proxy it's the number that results over five years if we are committed to holding average property tax rates stable it's made up on the second page this one here through the several savings proposals so we're anticipating saving $250 million yes at least over five years it's not a one year shortfall it's a five and in some cases a six year phase in of initiatives I have some assumptions about the ratios and looking over the documents on the family website it looks like in 2013 with the passage of action on the 66 we added 100 pre-K teachers but also during that time we lost 26 kindergarten teachers 120 elementary school teachers and 330 secondary teachers these are the teachers we were talking about so nearly 500 actual direct instruction teachers that we've lost I know that in my district the work that they did with the DOG they were able to reduce 21 care educators but actually it's a zero sum because they replaced it with seven special educators so the savings would not be there I'm curious about the assumptions on your savings and how you calculated your student staff ratios come up with 250 million was this just a broad one or was it new blocks at all yeah sure so we started at the statewide average and I want to actually clarify that this particular model has taken out staff that could actually be contracted for because that was another piece that we were concerned about which is that local folks will just say well I'm just going to contract this out and it's not going to really change the budget I want to clarify that because what the data looks like and what that ratio looks like depends on who's actually involved in that particular analysis these don't include pre-pay so the plan that we're talking about does not include pre-pay in the analyses those staff are excluded I can't remember what your question was can you tell me a little bit about this how it got to be big and the fact that we lost we lost over time almost 500 average teaching staff and I'm concerned that the perception is that everybody's thinking of small class size when in reality the teaching staff is reducing but other things are increasing so I wasn't looking more in why I think this is exactly thank you for clarifying that I think this is exactly what the task force would take up so we are talking in pretty broad for our strokes as we talked about and that's the purpose of the task force to really look at where are the current retirements or voluntary leaving happening is there an impact you know I also I think that's what I'll say because I think that a lot of what's happening is that we'll actually really rezeal a lot more about that particular question we have which is who is actually already leaving and taking positions not being placed that is more an impact than we know as a result of that 46 we don't have a great way to measure that right now we will as time goes on the 250 million is a gross calculation yeah that was and Commissioner Gresham I think those were proportional incremental at the end of the day we are talking about over 5 years not even a 1 FTE increase it's a 0.6 FTE increase and to go back to what Mary Cooper had asked I think not to do it here but I think what all of our committees made some information behind these estimates we are not going to hash it out here within this room and I know you all think it's really important really quickly those numbers and we're happy to provide them they're not nearly as steep as you might think and might we get those by the end of today tomorrow morning can we get back to my desk end of today I have a quick question and it's more of a policy click is that the administrations believe that higher spending should result in higher tax rates or do you reject that idea the administration believes there should be a connection between what voters vote in their budgets and their tax rates so higher spending should result in higher tax rates it depends on from what base what does that mean if you're starting from a very low base I mean there have been bills passed in this building that were more frankly spenders at very low base and a lot of the increase they're spending so I would say in general yes we do but as you know there are many contingencies so anything that insulates towns from the decision spend more money and protects them higher tax rates would be in contradiction to that policy we believe the plan that we presented today would in fact reconnect voters more closely with the decisions they make just a question on the balance sheet you know the gap is the difference between the revenues and the expenditures and when I look at the expenditure lines lines 13 through 25 there's 13 areas of expenditures here of which 7 are level funded the whole way through this balance sheet so is it really your assumption that there will be no increase in cost for state play students for medical education small schools adult education community high school reappraisal and listing and other do you really anticipate those are going to be the ones that were flat in the past our analysts at tax observed that there was up and down there wasn't any clear trend of growth I believe they did connect with JFO on those items I believe they may have identified some where there was some small growth ultimately immaterial to the total and to the extent that this outlook which is kind of what I might call the destiny of the ed fund with no policy interventions to the extent that we would grow those it would just show more opportunity for saving to intervene on some of those costs or not those are not areas either that I know we've kind of been asking for a budget increase which means a big benefit I think that the forecasting answer is that you know when you see a goal like this and up and down and then I think R.A.M.J. essentially just held it flat so we're open to better numbers on that yeah Mike I'm sorry I forgot you and I apologize My question is similar to people on the KDAS but the goal of our educational public education system is to help students succeed so talking about students to staff ratios a little different from talking about classroom size you have a classroom of 20 students with a teacher and several aides and how do we go about reducing increasing the students to staff ratio without impacting the students who need extra help to achieve proficiency That's a great question I think this is covered a lot in age 897 which has already been passed so for students who need extra help we're really talking about moving to a more integrated model over the next few years where we focus more on what are called level 1 instruction practices what we have right now is based on the DMG study that we use the schools in those SUs are sort of moving right away to special education practices like a tier 2 level which is a more intensive level and there's evidence that shows that's a not really the best practice for helping all of our students learn and then b it is more expensive so I would say what we're talking about is inherently meant to free up resources that are not exactly that which is to actually get back to parents and make sure that that's happening well Just for house appropriations and I'm sure the other two committees would find the information interesting and Janet and Mary have both alluded to it when you go through and bring us the analysis used to like for the student teacher ratio and for the bargaining for healthcare savings we really need to see the analysis so we need to understand the risks behind these numbers are these solid numbers can I take them to the bank when we invested our $13 for over $100 million we saw an amortization schedule we saw the numbers we know what we can basically count on with small variation I want to know are these the high, the medium, the low numbers, where are they falling what factors did you use to come up with them, what historical data with the student teacher ratio if I look at historical data I'm very skeptical any of this will happen unless it's mandated are you expecting to mandate some of these changes and if not how did you arrive at these savings and how much risk is there in getting the money back those are really important things we guide our path forward to find that common ground in the end and risk is really important to house appropriations so I look forward to that information and I don't mean to beat a dead horse but I do want to know if we come up with a proposal and let's say it's the one that the governor has put before us knowing that 50% of the people will experience property tax rate increases will he sign the bill because this says no so if we put his proposal on the table will he sign it we're looking at the average statewide property tax he may want to modify residential and non-resident and the answer to your question if you put his proposal on the table yes he will sign it but so let's be clear that I have questions about this proposal I asked earlier if this passed there were 127 towns that are getting the tax increase would get a bigger tax they won't get a tax increase as a result of this proposal will they no they will get less tax and they will get a lower tax increase than they would otherwise have got I think that a different message is going to come out of here let's clarify that I think it's a fair question but I think we got to talk about this in the right way and I say this as a person if you have questions about this proposal no and that's absolutely right and I think it's worthwhile to rewind to the December 1 letter and think about all the progress that has been made mostly outside of this building but by local school boards we started with a projection for a 9.4 cent average tax increase and what's come out of 9-11 is a 2.6 cent average tax increase that yes we'll have some paying more than we would like to get to a place where we have a zero average tax rate increase that would keep saying tax rate increase and that would be 2.6 less cents less for those that are experiencing a tax increase it's not a proposal that is actually raising taxes on those people as a result of that proposal correct it's not the proposal it is not the proposal that consists of a baseline where 100% is going up what's the definition if you're having a tax increase and this proposal making it less than it was that's certainly not a tax increase that Eric signed it's not a government policy proposal that's raising different tax rates in different districts if we pick up the proposal that the administration has proposed there will be a resulting tax increase for 127 tax that will be less than one of the other ones but yes there will be a resulting tax increase for 27% the last person I had on my list was Mary Hooper you asked my question twice they were over time thank you very much thank you thank you thank you my perspective it's always helpful to have our physical staff tell us what those are we've invited Mark and Debra to help inform us as to what it looks like from hand perspective so without further ado I'll turn the mic a little over uh-oh that is Mark yeah I had a question Trace my head Trace you mentioned it why you pass it to me while you pass it on to the staff yeah here can I help I got a question yep just because there Trace yeah I'm going to have to say please run out if you want okay so I'll be right back go ahead anybody who doesn't know me I'm Mark I'm the director of this club and I'm the main area of education finance and today I'm going to be going over the data flows analysis of the administration's proposal that we use tonight I'll start better I had a lot of documents and I'm actually going to just hit a couple of points on each one so don't be dawned on the number of documents we have I'm going to do a couple of points on each one and I'm happy to entertain any questions you have as we go along the first sheet that you look at some of you may be familiar with it's just the education fund that came out of conference and the only addition to live here is we've added the administration's proposal on the ballot sheet so on this half of the sheet we have the possibility the administration's the government over if I wish this was going on but just a very good idea to concentrate on the administration and 9-11 as passed by the conference and if you look at lines A and lines C on there you can see there under the administration's proposal and is in FY18, so flat average home state tax rate. If you move over to the 9-11 S-Catholic Conference, you can see that the average home state tax rate is $1.526, so that's a 2.6 cent increase over FY18. That increase happens to be commensurate with the increase in spending. Then, it's about 1.8% on each on the lay-in spending. That was because you were able during the session to have a, you went back and re-visited FY18, the revenue forecast, found some additional one-time money and used some of that one-time money for a one-time purpose, which was the full reserve in FY18 and FY19. Consequently, you were able to bring the tax rate down to about $1.55, and it actually went down to about $1.59, that's one point, down to the $1.526 milliard, okay? On line C, the non-home state property tax rate, again, in the administration, would keep that rate at $1.53.5, which is the same as we were at in 2018, but the profits can be reported, raised out by five and a half cents to $1.59, okay? And you're going to bring it, but you go down to the bottom of the sheet, on line 33, you can see both the administration proposing to do that, and under the 9.11 construct, reserve is still at 5%. So how did that happen? Well, what happened is, in order for the administration to construct work, in order to keep those tax rates flat, and to reserve 4.5%, the administration needs another $55 million in order to make that work, in one time on either of them, in the team, so. Everybody with me on that? I think they just said this morning, 40 minutes ago. A couple of hours ago. Okay, and maybe I should address that right now, it's been a lot of discussion about how much money is needed in order to keep the tax rates flat, and the proposal's been changing over time, so it's been a little hard to talk about with it. I know. This construct assumes that the administration does not use the $9.8 million that the legislation used to fill this room in FY18, with the one time money that you got in the 1th grade. I don't know what you're calling, it was 9.8 million that was added to the education fund from the general fund based on the revenue upgrade, and then talking about it coming to FY18, okay? So because I'm assuming that the budget didn't veto, we didn't include that money in the administration, so we couldn't pay that money back on the dollar down by that 9.8 million dollars if the administration decides they don't use that money in that purpose, okay? The other thing that's come to a little bit of confusion is H911 hasn't changed the budget, that's just that the government was initially okay with, and what that would have been done is it would have reduced the income sensitivity for tax pay between 90,000 and $140,000. It would have reduced the property tax adjustment by a little over $11 million, and initially the administration indicated that they were okay with that. I think that they understood after looking at it on a close date that that's actually not a savings, but an increase in taxes on people who are between 90,000 and $147,000, and receiving a partial property tax adjustment. So if you know any of those things that you've said, I think that's official, which doesn't mean I feel so. If you just explain that to me, I would understand. It's okay by the sheet. Okay, so that's not the sheet. The sheet that came over to you guys is the one I was hoping to work for, and there are only differences. The two columns in here were part of the conference committee because we have a column in the house and we have a column in the Senate. At the end of the day, we have one column, which is on the conference agreement that I want you to approve. So those two lines can be ignored on the screen and what you've got in front of you is the correct outlook, okay? So everybody with me on that? I lost you, yeah, I think we have a lot of them. I lost you. Where's the 33? 33 doesn't show up on here, but I was talking about it. I don't have those categories to try to find out. The big differences is that the 58 million dollars we initially started out with was reduced by the fact that the administration couldn't use one-time money that you found in 2018 to fill the reserves in 2018 and 2019, and then they were also initially working through seven, nine, 11 provisions on property tax adjustment, which were a button of 11 and a half million dollars after the fund. So that's where we are. My understanding right now is that we're really back at $55 million, but it's in that ballpark, okay? So you want to go over here next? Yeah, I'll go over there next year. Oops, it's the administration's body here, please. Over here? Over here? No, it's a public home. No, it's a public home. This one. Yeah, he's a coach, but I wanted to know. There it is, down there, it's a different part of here. No one's going to be able to do that. All right, I'll go over there. Is that it? Uh... Okay, wait a minute. I don't know, okay, I'll go over there. I can't really see the book. That looks pretty good. Okay, okay, again, I'm going to do the same kind of exercise I just did about. So look, if you go up the line A and B, you can see that under the administration, by the way, this is the administration's five-year outlook. We don't necessarily agree with the numbers that are in here. I'm just using this as an illustration using the administration's own estimates. So what's going on here is the administration is proposing to keep the average home state tax rate and the non-residential tax rate flat going all the way up to 24, okay? And then to drop down to the bottom of the sheet, you can see that they're also assuming that they're going to be able to fill the education fund we reserve for 5% every year. That's important because if you maintain a construct that's a 9.11 of getting rid of the general fund transfer, there's no longer the legal room in the education fund to be between 3.5% and 5%. It needs to be at 5% because there's no longer a surrogate to the general fund transfer in the general fund, okay? So how do we do this? So we go back up to this line. What they've done on their sheet is they have under 12 moving on paper they got a line in the hand that they were going to his gap. Dollars needed to fill to keep the reserve flat, okay? If you look over time from that Y-19 forward, now those numbers up to $150 million in money that must be found in order for this construct to work. In other words, you can't have a flat homestead and non-residential tax rates and a full reserve with the monies that we anticipate coming to the fund even under the administration's assumptions. You've got to find that amount of money. The administration has proposed sort of a five-page model for either savings, additional use of one-time money, or borrow. And it's unclear to us exactly how the proposal group is each year, but this gives you a sense of the magnitude of the money that hasn't been found. I wasn't in there, I was there for the administration's presentation, but next very morning we asked them for their cost to get it in the customer account to try to get an idea of how they actually came up with some of the cost savings, which I'll talk about later. And at that time, they were still working on the proposal, so they weren't willing to share them. So we went ahead, we hope you have an email, which was a lot of information, including this five-year sheet, and did an analysis, which I'll get to at the end if we have time, and if I don't, I can pass it on to you, really. But it's a more detailed analysis that takes a look at each one of their individual cost savings provisions. Can I ask a question? Yes. Just for clarification. The information that you asked for, they were still working on the proposal, but these were the numbers that were out in the media as actual savings, and the proposals were already reviewed to review. Thank you. And one other point I want to make, is if we have time to get to the memo of what you've got to see as an inconsistency, if you add up all of these numbers here, we can do around 250, the anticipated savings that they list for each of the five or six cost-economic measures they have is more or less a bigger number than that, and they are proposing to use that additional money to fund things that the Education Fund does not currently fund like higher education. But that would mean that, once you get to these other years, the statutory rate under current law would actually be lower than $1.50. They would, just like they were doing the rate down to $1.50 this year on official, in order to keep tax rates flat with the additional one-time money, by the time you get out to 23 and 24, the tax rate would be kept artificially high, in order to bring in some additional money that could be, that Congress didn't use for other purposes than the Education Fund currently is authorized to use like higher rate. Okay. Any other questions so far? Okay. Thanks, one. Yeah, and then to what we say is this, I don't know if you can have that up there or if people have comments like this. There's two here called unofficial homestead, which one is it? The alphabetical or the? The other one. Newspeak is the only one. People may want both names. I have a comment for anybody who wants to go. I'm gonna go with this shot right here. So the rationale, this is the standard analysis we do all the time. It's just compared to the proposals together and shows you all the tax rate would be a time by time basis. So in this case, we're comparing 9-11 as a past, with the government proposal as we know it right now. And there's been a lot of confusion in the building because of why try really hard to remind people when we're looking at these rates that the homestead tax rate is an average tax rate, not an absolute tax rate. Not an exponential tax rate is the same in every district across, in every town across the state. And the homestead tax rate varies in every community. So when you say that you're going to hold tax rates flat and keeping the average homestead tax rate at a dollar and a half, what that translates into is tax rates increasing. Even under the government's card structure and additional $54 million, you have 127 pounds that are gonna see a tax rate increase. And I want to say that these are equalized tax rates so it assumes that it's the tax rate based on the fair market value of your property. So all of the normal things we go through that got us crazy in trying to figure out what our account actually is, like the CLA, no use of money, one kind of money, all that kind of stuff. That's all clear about this. What we're looking at is tax rates that are profitable across towns and reflect the full market value of your property. So they already incorporated the grocery brand list that we had shown when we were coming that way. And although 9-11 has 174 pounds with a tax rate increase that's compared to 127 for the government, the reason for that is one week of not almost half is one has $54 million in additional one thing that 9-11 does not have. Any questions on that? Oh, we're just talking about it, okay. Oh, what you want to work on? All right, what order are the towns? The towns in here are sorted by the next-to-last column on the right-hand side, which is the percentage increase in the change in their tax rate in NYM, in NY-19. Oh, well, yes. Okay, there's 32 versions of this sheet. One is now for better meaning because I thought it would be a hard time for people to find their time in a 7-minute sheet. The other one is ranked by the change in their tax rate between NY-18 and NY-19. And I will give profits at both end of the year. So a lot of people are looking at that. These people are not in the previous year. So one thing I would like to mention here is that on the administration sheet, you see these tax rates remaining constant over 70 years. The tax rate is under current law. It's the only signal that a school board has that their budget may be out of line when their water's reached its right. They propose a budget. It says the tax rate's going to fall back somehow and they hear from their water so that's more than they can bear. If you hold the tax rate flat every year, you know, I hear a lot of talk about there being a disconnect between spending and tax rate. If you hold the tax rate flat for 70 years, that's a huge disconnect between when you spend and the way your tax rate is. And it implies, if you're assured that the tax rate is not going to vary from $1.50 or $1.53, is that regardless of what they spend and somebody else is going to come in and fill the gap, not the people who are voting for the budgets. The other thing is, if you take a look at those of you who have a sheet that's wagged, you can see that the districts that are the highest spenders in FY19 get the biggest break in the tax rate between $9.50 and $9.50 proposal simply because they spend most. It should not work out as much but it's kind of reversed. Can you clarify that? Because I was thinking just the opposite was happening. The tax rate is $1.53. That I would have to adjust my town budget so that I would have to make reductions because I know salaries and everything else is increasing that I would have to make those reductions to keep a great... Nobody's taxes are going to happen. It was by accident. Unless I'm in the middle of the average. Sure, in the average. Everybody else's tax rate is either going to be lower or higher than a dollar and a half because it's the average. But if I know that the average tax rate is going to remain constant, I'm essentially protecting against spending that this is going to hold. Not entirely. My district goes down a little bit but the situation right now is this tax rate is going to be growing every year because spending over a lot of money is going to be growing. For example, in a lot of this year, in 2023, if you hope that it won't be 50, you've got to come up with another $22 million. So the districts can spend $22 million when I'm in payboard. It's going to have to come from some other source. Possibly they can save it, especially by downing it out that far. But if you look at this year, this is anticipating spending $45.5 million next year by 2020. Which seems like a whole lot of money to be able to save in one year. My guess is that if you were to pass the government's contract and you get back to your FY20, you're going to have some significant portion of that $58 million that's going to be one-time money that's going to have to be made up from some other source. And their proposal is that it would come from people who are all savings. Or additional use of one-time money because... Or a loan. Or a loan. Or some other mechanism. It's hard to imagine that the savings probably isn't in the right place to do it. I mean, for example, special education savings, the special education bill on 897 which I think our office recently said money long-term doesn't pull a kick in at the level of 22. You know? So... So if there's no other questions that I'm not going to... So Mark, could you... If you spend one-time money this year, at least the whole next year of all things being equal. All the things are not being equal. So this... The $48 million you have from 19... Where are we talking? 20. Where is the $55 million of one-time money that we have to use to keep tax rates level? Where is that going to show up? Well, you're talking about a $19 million next year, right? So this... This sheet shows 45.5 short. And you've got to also... This is my point, $8 million up here because that's probably budget. That's about $35 million. That's $55 million? Yeah, that comes out. That comes out too, yeah. Some of that $55 million is... Oh, what about the follow-up? If we make that one-time money... We're going to face the same conundrum next year that we're looking at. Is that correct? If you use one-time money any year, you're going to have to make that money and make sure... Even if everything came down, tax rates came down, you still start now by having to make out that money. In other words, the school districts where they'll keep their spending absolutely flat and you use one-time money this year, you would have to raise tax to make up for that one-time money that you're using at $119 million. So what are they showing for rent number in the 20? Online... Online gap? We're at $57.5. And that's basically the $55 million from this year rolled over into next year. One-time money we're using... They're proposing to use one-time money this year. One-time money we're going to use here at $19 and we're still back to the $57.9 next year. So is it $57.9 plus $55 million? Of the one-time money we're using this year? I see. Because it didn't make... So it's really $112 million? Yes. You can grow up a year. You're writing it. That's correct. When you're doing it, as you go forward to the extent that you're not dealing with recurring revenues that's right. Yes. So all of them being able over here this time next year we're looking at $112 million one-time requirement? Yes. I'm going to shoot that to my back in my office, which I can share with the committees later, but there is that calculation and that's what happens. Done. Thank you. Thank you very much. 2020. I'm honestly confused. The governor is talking about he's saying it's in various programs. Would that mean that the education payment number would go down? That's a good question. So this is an education payment line. The current rate is about $2.6. I think ours is $2.7, so it's equivalent. It's not really that much difference, but it is a low rate of growth. So when you combine a really low rate of growth and all these additional savings on top of it, our concern is that you're overstating the amount of savings that you're going to have and you're likely double counting on these provisions. And if we have time, I'll go through each of the individual savings provisions. They have, but what happens is if you do estimates on each individual provision and come up with a number in total, you're going to be way over because all of them are interactive. And as an example, if you say, the biggest savings in the administration's plan is to change the staff to the people-to-staff ratio. Well, you can get savings by reducing that, but are you reducing that because you propose the high spending penalty on talents and they're trying to stand to that by using staff? If you're trying to save money on special education, are you losing staff in order to provide special education less expensively? So they could be double counting in each one of these pieces and it hasn't been accounted for. We're confused. No more, okay? Does that make sense? I got it. Okay. And then, you know, and again, doing a five-year exercise is a great idea. It helps you see what's coming and one of the things we did in the JFO is we prepared this analysis and our analysis showed that apart from all of this, if spending continued to grow at its five-year average, which is about 2.7%, beginning in 2002, the tax rate on its own would start to come down because the grand list is starting to take off again in Guadalupe. Usually that's consistent for several years. Those of you that were here in 2005 will remember that after Act 60 passed, we had to make sure that all the tenure and the rate was able to come down every single year for a number of years because we had really robust growth in the grand list. So we had our grand list tagged over the last few years. We've had gradual increases. Now we're looking at an increase that doesn't mean I can't remember which makes it a little bit. The growth assumptions on grand list growth in the Guadalupe hand corner, you can see by 1,2,3,4 years old we're projecting forward with 4.4% growth in the grand list and that's going to keep trending upwards and that's going to take a lot of pressure from the world. The crazy part of all this is that that doesn't mean new tax bills coming down. The only thing you can affect with tax bills is to have spending time. But what this shows is that it shows a little bit of how arbitrary it is to focus on the rate. Because once the grand list is growing rates are going to come down but your tax bill is going to keep right on going right on going up. So the rate doesn't take only to have a half a story. Right? Your tax bill is a function of the value of your house plus the tax bill. So But again that 4% is likely to keep growing in the hour years and we're likely to be in a position in just a few years to see that coming down. When you're adding the tax that we think that there's a problem in our savings and the special education bill in 1897 and some of the other things that have been done in that we're probably going through a period that we'll top here in just a few years to get over and in doing that there will probably be some rates coming down. After 2008 didn't property values decline? If it's like for several years in a way. Right. What would have happened here? What would the effect be? Tax rates would go up. Exactly. And we haven't had any recession since 2008? That's a good point. And that's the reason that you can use this just like you do in your own finance. You want to look ahead and see if there's any problems coming and get an idea of what's going on. But 2022 we might tip it to recession. We're currently in the lobbyist expansion I think or the second lobbyist expansion in history. So there's basically the next five or six years we might get a downturn. And if that happens then all this All this is just wishful thinking. Wishful thinking. You know what? I got a point I managed being an analyst from the fiscal office I probably shouldn't say this but in January we were projecting that education spending was going to go by 3.1%. And again 1.8 and that was three months in advance of the actual numbers coming in. We're talking about five or six years out of it. So you've got to take this with a grain of salt. But there's nothing wrong with doing this. The risk is that you take this to heart and base your tax rates and your fiscal decisions in this year based on this outlook which I personally would think is a lot optimistic. Then then you're going to be in trouble. I haven't wanted to. Other questions? Great. Tim, do you have some analysis for us? Yes, I do. So I'll turn this over to Tim. I have a little up here because we're going to start with a little more detailed rate. But he's interested in it. I've gone over most of the stuff on FY19 which is what you've got to really deal with right now. But the main road it deals with influences with the administration on their cost estimates or savings in the five or six good growth agencies. Well, I can't do one but I could also pass it out and let people look at it. Why don't we let them throw it in from back to you. Thank you. You're welcome. Thank you. Thank you. So what I want to do is sort of illustrate get away from the details for a little bit and illustrate what's going on and the difference between our current kind of setting an equalised rights and then the idea of freezing alone and constant equalised tax rate quite different. different. Since it involves equalized sex rights I just wanted to start with making sure that we're all clear on what the equalized saturated is essentially and so what we do now is we take the spending, I'm going to call it spending for short, but I really mean all of the costs of spending the end fund and subtracting from that the non-compact tax revenues and the problem that we have to raise on the public tax. We divide that by the equalized rent list and we get the equalized tax rate. And so if spending the growth and the growth in the equalized stage of continuing rent list go up with the same percentage there's no change in the equalized tax rate. So if spending goes up 3% and the rent list goes up 3% the tax rate stays the same. And as Mark was saying in the years like 2000 to 2008 rent list was growing in banquesters and faster than, it's more like 8% a year and faster than education spending so therefore we were going on equalized rate every year. And then after that rent list stopped growing essentially some of these were negative and so we had to raise the rate every year. And we kind of think at the point where maybe not most of the year after it will change and the rent list goes a little greater than spending growth and therefore we'll be able to lower the equalized rate again. So what actually happens, this is showing you just a constant equalized rate, the solid line but above it is the line of the actual tax rate or what people are taxed on. So what happens here is if you think about the equalized, let's say that the spending went up 3% and let's say that the education, the equalized education grant list went up 3% also so the rent can stay the same but we still need to raise 3% more money than we did the year before. So where does it come from? It comes from that increment, the growth from the rent list, that increment, 3% growth. If that 3% growth were new tax papers then that would be great. That would cover that 3% increase in spending. But it isn't. The projection is that about 80% of the increase in the rent list is actually appreciation in primary values of properties over here. So essentially that same rate is raising more money every year. Equalized rate is constant but your tax rate, your tax bill goes up and if you can consider this a talent that doesn't normally appraise them their actual equalized tax rate stays the same and we adjust that rate and give each talent an actual tax rate based on the common level for a person which is a measure of the increase in the property value. So two things I want to point out of that chart and the first is that when you say that you're holding the equalized rate constant there are actually increases in the rate. So it's not that we're keeping people's tax bills constant, not that we're keeping their tax rate constant. The second thing is that what is the basis then for a measurement of gold? What does it tell us for policy? Is it something that we should be striving for, a constant equalized rate? The difference is what we do currently and you have the same thing that the equalized rate is a solid line and an actual rate where people would see is a later line on top. And so normally what we would do the first year we still have to raise the rate because the equalized ran list hasn't gone up as fast as we anticipated it was running but then after that we start to see a more rapid increase in it equalized education ran list and we go up the rate to come up with exactly the right amount of money for spending. And so what this does is it also lowers this rate which continues to be higher because that's a function of appreciation. So this is what we would do on the current log if we were able to get some savings. And for savings I just ran it starting at 5 million and going up to 15 million. I just wanted to do this to compare what would happen under the other scenario. And so what you see is both rates would go down. This is coming in at a higher trend for the short term with some savings in it so rates would go down in general situations. With a constant rate scenario with one other difference and that is when I'm starting from the different points so that the constant rate version is starting lower at a lower rate. And in order to do this it has to either deficit spend but I'm saying it's taking the loan from the gentleman which is going to repay during the five years. So as you could expect the tax rate both the equalized rates and the actual rates are lower in the first two years about the same in the third year and then in the fourth and the fifth year under the constant rate they're much higher. Essentially they're paying them back for lower or lower years. So that's really what you would expect. That either lowering the rate for two years is a bit of a incremental and then the retire to pay back the earlier savings. But the other thing I wanted to point out here is that we're always trying to make sure that there's a connection between spending and tax consequences. And what's actually happening here is that at the point in which the tax are actually implementing cost savings so the savings are really keeping in here. Under the current way of doing a business tax rate, the actual tax rate interest would be very slim and that is because we're trying to cut back so our spending is going down with a lower rate. However, under the constant rate of the loaner to pay back your rate would accelerate essentially in the very years that you're paying them a bunch of and so it would go up. So there would be that little distance between the efforts to, on cost-containing and under the tax consequences. There's one other thing I wanted to point out about this is that kind of the reason that this is happening is because you have this different starting point and because you're running a deficit and you're paying a loan, of course you do that. And this starting point in the lower one is predicated on the FY18 actual equalized tax rates. And all of these numbers, as Mark said, all of the numbers in his spreadsheet are sort of smooth numbers because we're assuming there will be no anomalies, although they will be moving like that. But the FY18 rate here that we're starting with is an anomaly. And it is unusually low and that was because there was one time not being used to the loaner and also we didn't show it was young. So if you could recapitulate the FY18 rate based on everything else that's saying but just not putting that one time order and you might feel for the serve, you would come out with a tax rate of $1.58 for the modern residential and $1.55 for Homestead, that would be one pair, or $1.59 for the modern residential and $1.54 for Homestead. But it would be essentially bringing this starting point up to there. What that would do would be to me that you wouldn't want to deficit my first year if you actually used recapitulative FY18 rates and then whether changes would remain since then in the legislative version. So the difference would be more like that between the two proposals. So I guess when I step back and looked at this and ran into a bunch of these through and looked at them, what they made for policy implications and two questions really. And the first one is what is good necessarily and why would we strive to have a constant equalized rate? It would mean people's actual tax rates would go up or down based on appreciation. And what is the goal there? Why would that be our policy role? The second question I have is really about the starting point. And that is should we start as a locking something that was anomaly and then try to force our system into fitting them or can we start with a recount in the FY18 rate? And I would look forward from there to your own point. No. My answer to your own question is I honestly cannot see why keeping a constant rate does anything good for policy reasons? And I personally feel that running a deficit and then repaying the loan puts us in a risky place. Some of you asked a question about what happens if we don't get those if we don't get that appreciation and I did run just an exercise. If the appreciation was 2% all the way through it makes a $200 million difference in the fifth year. It can be substantial. So I mean it's something that we will deal with under current I guess we will deal with when that happens. But it's difficult to take out a loan and repay it based on an assumption like that. So the sheet that Mark showed you doesn't have any savings in it and you know we know there's some uncertainty about what the savings are and what that would do but it does have the uncertainty and the projection for legalized education and ran less closely. If they shouldn't get then maybe we'll get that. So if we go to the administration as we were going for a form initiative that looks like this page out of all the analysis JFO has done for the legislature we have heard testimony on the differences between the health care, a statewide health care number and we have seen the analysis on special education whether it was the UBM or the three studies that showed that three different savings. Do we have any, did JFO do any analysis on the student to teacher ratio that we could compare that number with? We have not any but the analysis and the administration has done is basically having an exercise back when we had 46 first class we were asked to do estimates for a class saving number at 46 which we agreed would be likely to happen and we did that so we could do a thought exercise and say if you reduce your, or increase your staff the pupil to staff ratio by X percent you can anticipate based on average salaries this amount of savings that, to my understanding that's the analysis that the administration has done to their savings so they're just assuming that the ratio is going to improve over time however there's no mechanism in their proposal to ensure that that occurs 9-11 is actually a task force but 9-11 is not going to make it so whether that survives or not I don't know it's a task force to look at this very issue but as far as I know there's no more sophisticated analysis done other than saying the average salary is X if we increase our ratio to Y we can do a lot of location and come home with savings So just so that I'm clear and I hate to speak to them as I said earlier the savings being half the total savings for the increased student staff ratio since we don't have the task force we can't expect to know what the task force is going to end up with until they've done their work so that's just something in the future there's no real analysis based on data that would prove that savings of $250 million I mean only that we know our student staff ratio is now we can assume it's going to be something different in the future we know what average salaries are we can do the multiplication of the savings as far as I know that's all the analysis that's been done and actually if you go the opposite we're in the student student teacher ratio actually becomes lower and it could cost more it couldn't go either way and here's to the administration I mean their analysis did include you're asking me I'm talking to you about the fiscal analysis their analysis did include other things like for example they recognized that there are some education services that could be contracted out so those they eliminated from their calculations and I think I'm not sure about they eliminated from oh special education because it's a federal mandate they eliminated special education teachers from the requirement or the hope that their ratio would improve but other than that I don't know I haven't seen more detailed analysis there for me to ask the joint fiscal office what is the risk in that number if you've had to you know say I can go to the bank in depth in my house on it yeah we do you do a risk analysis we could do a risk analysis and show you for example for each you know for each percent in decreasing or increasing the ratio what would cost but again it's a more thought exercise than the analysis the only way to really do the analysis would be about all the individual schools that figure out what their needs are what their current staffing is and maybe really different public bill so our sympathetic and the administration and the way they go about it because it's a very difficult number to come up with and also appearance but I'm re-rejected to the fact that there may be some double copying going on in here they reduced their estimate of savings by about half I think but we have no reason to assume that half makes any more sense for the recorders or the quarter or whatever it's you know sort of it's not a lot of barriers in the house it's fine if you want to repeat that Lauer's thank you so much I appreciate that and while I'm here as I was sitting there I did go through my memo a little bit but I think I've covered most of it I can basically summarize for you the three issues that we have with the administration's numbers and they're basically one we're concerned about double copying two we're concerned about overstating savings in some cases and three we're concerned about time and those are all in the mobile range we're going to do this kind of five-year forecast the only objection we have is we're going to bank those assumptions and start making fuck-discipline decisions based on the issue it's risky and that's the only message that I think we have Joyce me and Chester oh Joyce if you wanted to talk a little bit about the health care oh you did this morning there okay so that's part of my memo but it's the part of the memo for this confidence and that it will make my understanding of it so if you've covered it I guess it's fine I talked to House of Representatives but not the other committee so I don't have any questions on the topic do you just want to talk a little bit about the difference between the administration's estimates on health care savings and what care programs and then we'll have something else to finish up with after no it's that approach talking about time I'm all set this is the last piece of my memo much better than Joyce because we've talked and then maybe before we move on to that I have a question I don't know how I have a question for Deb and I just let me fumble around a little bit I was really struck by your chart that talked about the deficit spending and you know essentially how we have to get back onto normal to zero and with the administration's proposal we're talking about again doing deficit spending did you work that notion you did work that notion of it's a deficit and how do we get back up that's what the chart shows yes okay thank you like I said yeah we should discuss that since since house appropriations has seen this we're going to go back upstairs and and and let education come our your you should we strike yes yes스를 And I'm not dealing with the question of how to get there, how does the negotiation happen, who would oppose this, the single plan on all school employees, and simply talking about what did the numbers look like if we were able to use a single healthcare plan on all statewide school employees. So in order to answer that, well, let me start off by saying that the administration, the governor's letter of May 1st, showed savings over five years of $62 million. So the question is, can JFO come up with numbers that result in savings of about $62 million? The answer is no, we can't. What would you come up with is problems. So part of the problem is that we don't know which plan design was used by the administration to come up with $62 million. But we do have notes on the table that show 62 million CIT to healthcare, and the notes say three things. They say, number one, governor's target plan from 2017, and I'll talk about that, is a number two, the HBC, which is the Vermont Educational Health Benefit Commission, which talked about how do you get to statewide healthcare plan. And number three was a note that said H858, which was a proposed plan for a single healthcare plan for all teachers on all school personnel statewide. Okay, so when I approached the question, I said, okay, if I'm trying to figure out how much can be saved, if I move into a statewide teacher health contract, I need to know where we're starting, what's the cost of the current plans as were negotiated for 2018. So unfortunately, nobody in the state have that information, so we had to do a little bit of digging, and Chloe, was Chloe Wexler here? No. She deserves a huge round of applause, because she got through every contract in the state, every school district, every SU, to look at the terms of the contract. So the question is, okay, there are four plans offered by the high. What's the enrollment in each of the types of plans, and what's the enrollment in single person, two person, parent-child, and family plans? Is that different costs and different contributions to the savings in-house and so forth? Okay, so that was step number one. So we have a fantastic database now, we didn't have it three weeks ago, but now we have a fantastic database that gives us all those planned characteristics and enrollments, and we can look at the actual costs. Now, there's a glitch, and that is that that covers 62% of school personnel who are professional staff, and the professional staff contracts are online, pretty much online, she had to call some districts, but pretty much online. Okay, 22% of school personnel are support staff, and they have different contracts, meaning they have different health plan design, so that there are different costs paid by the employers for those school personnel. There's a third group, which is the administrative staff and non-union staff. They look more like the support staff, I'm sorry, they look more like the professional staff, and so if you were to impose the single state wide health plan on those people, it would look more like professional staff, so we're not too worried about those, but the support staff turned out to have more single plans than family plans relative to the professional staff. Okay, and in looking at the contracts, it became obvious that in some school districts, those support staff are only offered single person plan coverage, so the employer only pays enough to cover a single person plan. So we had to take account of that in our analysis in order to get a proper comparison of what plans are costing today and what they would cost when everybody in the state would be offered the same plan, single to personal family plans. Okay, so that's all incorporated in our numbers. Okay, let's see, we are assuming going forward that we have the same number of people enrolled in each district and the same choice of single to personal parent-child family plans. We have no other basis on which to think about numbers going forward, so that's what we're assuming. We are using medical cost inflation for health insurance premiums of 4.5%, going forward, that's based on CMS, National Health Expenditures projections of 4.7% on term growth in health insurance premiums. But nationwide, there is no individual mandate that you have to have health insurance, and in Vermont, you all have passed the bill that says yes, there is an individual mandate. So that brings down the cost growth a little bit from 4.7 to 4.5%. Okay, so those projections are based into our numbers. Okay, so now, if you wish, you can stare at the handout. I think it's not up on the screen, but you can stare at the handout. And I'm going to talk through the plans that are essential to think about when you're talking about what you're transitioning to. So we have to go back in time a little bit to the very first goal to the HP plan. That's redundant, I just need to say CDHP, which means Consumer Driven Health Plan. So there was an early plan priced by the actuaries that set the premiums at the beginning of 2018. And that's the baseline plan, plan number one on my list here. It had an 80-20 premium split, meaning that employers paid 80% of the premium, employees paid 20%. It had health reimbursement arrangements, HRAs with roll over to cover 75% of the pocket costs. So let me break that down a little bit. And HRA is an account with money that is put in by an employer. And that money belongs to the employer. So if you don't spend the money this year, it goes away. So that says that there is a little more incentive to use health care, leading to a little bit more utilization of health care. And eventually, that means more premiums. If you're using more health care, that's going to be paid for and that comes out of your views. Now, this first plan had roll over, which means if you stay with the employer and you have extra money in your account, it carries over to the next year. That's an unusual feature that did not show up in the plans as negotiated. Now, the original plan covered 75% of the pocket costs, or $1,875, meaning that the employee was on the hook for $625. And again, that money belongs to the employer. If you go to a different school district, it disappears. If you retire, it disappears. That was the plan that was priced by the actuaries that set the premium amount. Then we move to the gold CDHP plan that's the Governor's 2017 Target Plan. This is the plan that's being promoted by the Governor's Office a year ago in the spring. It was quite similar to the baseline plan, except that it had an HRA that covered 84% of added pocket costs for $2,100. And you hear $2,100 now, because that's the standard that was adopted for a single plan for $2,100, out of a maximum out-of-pocket $2,500. So the employee is on the hook for $400. And let me say one more word about the gold CDHP. Gold refers to the actuarial value or the amount of them costed or covered by the employer, I'm sorry, by the health insurance plan. So a gold plan is generally 80 to 85%, something like this. And the gold CDHP plan without the HRA has an actuarial value of 81.6%. Once you add in that HRA, the actuarial value goes up a lot. And in this case, with 84% or $2,100, it goes up to between 95% and 97%. So that says if you take a lot of people on this plan on average, the health plan pays for between 95% and 97% of all medical expenses. Which one was that? That's the governor's credit plan. Now, neither of those were actually in place. They were simply talked about as model plans. So then we move to the current plans, plan three, plans as implemented. And this is where Chloe spreadsheet comes in to be very important. She knows exactly what characteristics of what plan occurred in each school district, the enrollment, and so forth. So we're able to add up costs based on those actual details. It turns out that on average, 91.5% of people who took health plans through the school chose the goal to be HP. So a very large percentage chose that plan. But the negotiated premium split turned out to be a bit more generous at 81.9% so that employees pay on average 18.1% of premiums. Most of those plans had an HRI with no rollover, meaning that the money disappears at the end of the year. And they covered 84% of out-of-pocket costs. $2,100 in a single plan. So the $175 under FY19 is a pretty good representation of what the state, the education fund, paid for health insurance for school employees in FY19, what they will pay in FY19. And the 161.9 is annualized for the six months of calendar year 2018. I just wanted to make it a comparable number on an annual basis. Okay, no questions so far? All right then. We can move on to plan four, which is a proposed plan in H-858. And this is important because it was mentioned, as I said earlier, in the governor's memo of maintenance. So the plan in H-858 is to get a goal to the HP with the 80-20 premium split, but the big difference is moving to all health savings accounts for anybody who can take a health savings account. And it would be for 84%, again, the $2,100, okay? Now, we have to talk funding of these accounts. A health savings account belongs to the individual, belongs to the employee, and therefore every one of those $2,100 has to be put into the account, right? It's funding at 100%. That's quite different from an HRA. Remember, that belongs to the employer, and the money goes in as it's needed. So, most employees do not end up using all of their HRA. They don't use most of the out-of-pocket amount. And so, on average, nationwide, employers tend to fund about 60% of HRAs. So you can see that it would be cheaper for the employer to offer the HRA, right? Now, in the long run, it may turn out to be more expensive because people view that as amounts of money. Why not use it to go to the doctor if I don't really need to go, but I'll go because it's not going to cost me anything. So, in the long run, the premiums will grow faster at a higher level. But in the short run, it is cheaper to fund. Okay, so I now have these four different plans, and one thing I haven't yet mentioned is that Kai knew that there might be some transition costs, and so they built up their reserves a little more than they would have otherwise. And it turned out that they were right that the actuaries had underpriced the goal to DHP from the very beginning. So in the first six months of this year, 2018, VHI took 3.5 million out of their reserves to help cushion the impact on premiums. Premiums would have been at higher without the infusion from VHI reserves. This is continued in FY19. They have already said they would put another 8 million into premiums so that they wouldn't have to rise as fast as it is. They're increasing 10.1% for the old CDHP. Overall, they're increasing 10%. And they have said that if we stay with the same implemented plans, they anticipate putting another 8 million from reserves into the premiums in FY19. So in my numbers, I'm assuming that over a four or five year period, they would have to pay back those reserves. So that's built into my premium numbers. So remember, we started off with premiums too low because the actuaries were pricing a different plan than was implemented. And in addition to that, we have this infusion of reserves from VHI that's keeping premiums artificially low. So all that has to be in my numbers and what I look forward. So you can see I've got millions of dollars here in total costs, so this includes premiums and contributions to HRAs or HSAs, under these different plans. And if you go to the middle of a page where it says difference from current plans, I'm thinking here about, okay, if we move from our current plans as implemented to either HA 58 or to the governor's target plan, what's the difference in cost? And the bottom line is that if you move to an HA 58 plan, remember it has those HSAs that are more expensive to fund, then you end up actually spending 42.9 million more than under the current system, under the current plans. Okay, so that's not a good direction to move in. If instead you start the governor's target plan in FY 20, then my number suggests you can say $44 million over that five-year period. But I'm saying $44 million, not $62 million. And I have a theory about why. My theory says that when the governor's team looked back at the target plan from 2017, they were looking at that original level of premiums, not adjusted for the utilization change, right? So their premiums throughout the five-year projection period are probably too low. That's my guess. We have asked for an explanation and have not received explanation from the administration, but that's the best I can do in terms of an explanation. So that's where I come up. So instead of $62 million, you might get $44 million if you go towards the HSAs in the H858 plan, you might actually be spending $43 million more. Are there any questions about all that? All right, so Maloula, I'm kind of confused. I could get up here. We heard our commissioner Pichek talking, talking about a plan that was an all-HSA plan. So I'm confused as well. Absolutely. Okay. I'll let you answer my question, I guess. Right. And we have talked... I have something to always hear about the HSAs is that projected out, they're actually a cost-saver, but your numbers don't support that, at least so I got the FY24. Correct. And we have talked at aggression about this and tried to find out if they understood the difference in funding and we didn't get a clear answer. But I do not understand how they could follow H858 in Soviet cities. I don't see how that works. Okay. And I also... Your numbers are just... Did you say that this is just looking at professional staff? No. So we looked at professional staff in order to get their plan characteristics. We then looked at support staff and understand that their plan offerings are a little bit different. So we made the adjustment in the current plans line to say what's the actual cost that we're spending today. Then we imposed the professional staff plan characteristics and choice of family single plans and all that to the other plans because it's statewide, that's what would happen, right? And then it didn't count really that if I'm losing in this imposed plan, I might want to make up what salary I'm going to have. No, we could not go on there. No. That would be important but we could not go on there. Thank you. Thank you. Thank you very much. Thank you. Thank you very much. Have a good day. Thank you.