Monday, June 8, 2015

Tough Target for Vermont’s Schools: ‘Spending Growth Limit’ Will Be Challenge to Hit

By Matt Hongoltz-Hetling
Valley News Staff Writer
Sunday, June 7, 2015
(Published in print: Sunday, June 7, 2015) 
Hartford — When Vermont Gov. Peter Shumlin penned a major education reform bill into law on Tuesday, he emphasized the bill’s goals of “right-sizing” education infrastructure, improving opportunities for the state’s students and providing property tax relief.

But adapting to H 361 will be difficult for dozens of school districts throughout the state, including many in the Upper Valley, which are now charged with limiting their spending growth to less than 2 percent per pupil , under threat of stiff penalties, in the 2016-17 school year
“We needed to have something that sent a very clear message that the expectation is that we will all take a very good look at our spending habits,” said Rep. Kevin “Coach” Christie, D-Hartford, a member of the House Committee on Education.
An earlier version of the bill supported by Christie included a hard spending cap limiting budget growth for all school districts, but after many school districts spoke out against the spending caps, legislators agreed on a compromise, the “variable education spending growth limit.” 

That limit identifies a target spending goal for each of the state’s 267 individual districts. If a district’s budget increases by more than its target over the next two years, its property taxpayers will incur stiff penalties. 

Under the new formula, districts with higher per-pupil spending are held to stricter limits, while those with lower per-pupil spending have more leeway. The amount is calculated on a per-pupil basis, so if a school’s population grows it will have more space in the budget, while a shrinking student population would result in a tighter allowance.
Not all school expenditures are counted against the per-pupil spending number. Under existing law, about a dozen types of expenditures, the most significant of which is capital spending, are excluded, according to Mark Perrault, a senior fiscal analyst with the state’s Legislative Joint Fiscal Office.
If a school has borrowed money to pay for a new building, for example, the amount of the debt service doesn’t count against the per-pupil spending amount used in state calculations.

A list of about 250 districts from the Legislature shows that, at the upper end of the spectrum, districts spending about $18,000 on each student in the upcoming school year, fiscal 2016, can’t increase their per-pupil spending at all in budgets to go before voters at March 2016 Town Meeting. 

At the other end of the spectrum, a handful of schools that spend between $8,000 and $10,000 per student have much more latitude to increase their spending, by as much as $524, or 5.5 percent, per student.

Hartford is somewhere in the middle, spending $14,858 on each of its 1,510 students under the fiscal year 2016 budget of $22.4 million. That means the district is allowed to increase spending by only 1.65 percent in the FY17 budget it will present to voters next March, which amounts to $245 per pupil and a total of $371,000.

That’s more latitude than many districts will receive, but it’s a far cry from the $1.3 million increase approved by Hartford School District voters this spring, which school officials argued was the absolute minimum needed to prevent the elimination of staff. 

Perrault said the limits give districts more flexibility than an iron-clad mandate.

“Nothing requires how much they can spend. It’s not a cap,” said Perrault.

 But Christie, who is also a member of the Hartford School Board, said he expected every district would comply with the spending targets, “because, if you’re over that, you’re going to get slammed.” 

Perrault said that, for every $1 a district spends above the target spending limit, taxpayers in that district will be charged as if district spending had actually increased by $2, with the additional money going into the state education fund.

“The amount they spend over that limit gets counted twice,” Perrault said.
In Hartford, for example, the spending increase threshold is 1.65 percent, or $245 per student. Based on current tax rates, increasing the threshold by $245 would result in a school tax rate of $1.56 per $100 of taxable property, or $3,900 on a home valued at $250,000. 
But if Hartford were to increase spending by 2.3 percent, which represents an additional $100 per student, the tax rate would be calculated as if it had spent an additional $200 per student, resulting in a $75 tax increase on that home. And if per-pupil spending increased 5 percent, taxes would go up by $275 on that home, according to tax-rate calculations by Perrault.

In the Windsor Southeast Supervisory Union, four member school districts in Hartland, Windsor, West Windsor and Weathersfield are allowed to increase their spending by amounts ranging from less than 1 percent to about 2.7 percent.

Those amounts aren’t realistic, said supervisory union Superintendent David Baker.

“It is an incredibly tough budget hoop,” Baker said. “With the continued unpredictable nature of special education, the benefits piece unstable, contractual increases in salaries, and health insurance costs, staying within the cap is going to be nearly impossible in all of these towns.”

Baker said discussions with other superintendents in the region revealed that most expected they would be forced to reduce staff to comply with their targeted spending limits.

Steve Dale, executive director of the Vermont School Boards Association, said the Legislature deserves credit for tackling the big issues of the dramatic spending inequality that has emerged among Vermont schools, and finding a way to provide property tax relief.

By giving schools options on how and when to pursue consolidation and control their costs, the Legislature has provided a lot of appreciated flexibility, he said. However, Dale said, the association has also identified the cost control mechanism as a major flaw in the bill.

Under the formula, schools spending more than the state average presumably have some room to trim expenses, while schools spending much less than the state average have more room to increase spending. But Dale said the cost constraints will be particularly difficult for a group of about 50 schools that spend moderately less than the state average of $14,164 per student, but which will be able to increase their spending by only about 2 percent. He predicted that many schools in this category would be forced to go over the threshold, creating steep tax increases, rather than tax relief, in those communities.

“It virtually guarantees that a whole set of lower spending districts could have a large tax increase,” he said.

Dale also expressed concern that the bill didn’t provide any funding to the Agency of Education to implement the bill, which he said could leave many districts without the support they need to properly weigh their options. 

 Constitutional Questions
While Shumlin trumpeted the legislation as a “game changer for Vermont,” some groups are questioning whether it violates the precepts of the Brigham decision, the 1997 Vermont Supreme Court ruling that said educational opportunity should be “available on substantially equal terms” to students across the state, no matter the property wealth of their school districts. The Brigham case led to the Act 60 school funding system, and then its successor, Act 68.

Allen Gilbert, the executive director of the American Civil Liberties Union of Vermont, wrote Shumlin on May 19 saying his organization “doubts the constitutional validity” of the per pupil spending limits, noting that the Danby school district could spend up to $17,077 per pupil in fiscal year 2017 without triggering an increase in its education property tax, while the town of Lowell’s threshold would be just $11,688. Danby could spend 46 percent more per pupil than Lowell without triggering the tax penalty, Gilbert noted.

“If any one school spends above its cap, it will trigger the penalties that will create the constitutional infirmity of unequal access,” Gilbert wrote. “This matter is of great concern to the ACLU, and we will consider seriously any requests for legal assistance from districts that are harmed by the provision.”

In response, Secretary of Education Rebecca Holcombe wrote Gilbert on June 1, acknowledging that the provision could “result in some variance in school funding for a period of one or two years among different districts,” but that they could be, “at worst, relatively incidental.” She also said the measure was not a spending cap.

Holcombe, a Norwich resident and former educator in the Upper Valley, also noted that the Brigham decision left it to the Legislature to design the school funding system. 

“We appreciate that a final decision as to whether (the spending limits provision) fits within the above discretion is ultimately for the courts to decide. Nevertheless, we believe that the bill, on balance, represents progress in maintaining quality education for all Vermont students in light of continued statewide declining enrollments,” Holcombe wrote. “Without greater scale, some of our districts will be unable to provide high quality, equitable education.”

Considering Mergers
The new law aims to accelerate a trend toward consolidation of school districts by establishing a minimum threshold of 900 students per district. Districts that don’t have a voter-approved consolidation plan in hand by 2018 will have their cases reviewed by the Agency of Education, which will draft a consolidation plan for approval by the state Board of Education. 

The law includes significant incentives for districts that merge quickly, which has some districts scrambling to identify and lock in potential merger partners.

Hartford is comfortably above the minimum number of students, but school officials said they would like to explore the possibility of a merger, in part to take advantage of the significant tax benefits the state is providing to those that consolidate their administrative structures early.

Towns that have taxpayer-approved consolidation plans in hand by June 2017 will see a dramatic reduction in their taxes — in the first year, it amounts to 10 cents per $100 of valuation, or $250 on the property tax bill of a home valued at $250,000. The benefit diminishes by 2 cents per year over a five-year period. 

Hartford Superintendent Tom DeBalsi said during an April 22 meeting that the incentives are huge.
“Do people understand what that would mean for the Hartford School District, if we could open that conversation with some of the surrounding towns?” he asked. 

“If you can agree with another town to consolidate and form one school district, take in another town, you can get incentives off of your tax rate.”

Schools that consolidate after the deadline still receive a scaled-back incentive that starts at 8 cents off the tax rate in year one, and then declines by 2 cents per year over a four-year period.

Christie, who was chairman of the Hartford School Board for most of the time the bill was being written, said the district benefited from having that connection to the proceedings in Montpelier. “I have tried to keep a very close eye and make sure our administration knows where this is heading,” he said. “We started making adjustments years ago that have positioned us pretty well.”

Christie said Hartford has already reduced staff and taken other measures to improve efficiencies.

But Hartford officials also see an opportunity to earn a financial coup under the law, by taking advantage of significant incentives to merge with other districts. 

“Districts need to say, ‘Wait a minute, if we open up our minds, we might be able to come up with a plan that really provides a good organizational structure and also provides relief to our taxpayers,” Christie said.

In the April meeting, Hartford School Board member Peter Merrill proposed holding a series of public forums inviting feedback from the public about possible consolidation with other districts.
“Immediate candidates that come to mind are neighbors to the south because they are right on the interstate so they can transport students here quickly without huge transportation costs,” he said.
The Hartland School District, which lies to the south of Hartford, has only 453 students and has a higher per-pupil spending rate, $16,533, than Hartford. Under the new law, Hartland can increase its $7.5 million school budget by only 0.92 percent per pupil, or a total of $69,000, next year.

The forums, which have not yet been scheduled, are the beginning of a series of planned community discussions hosted by the Hartford School Board in an effort to generate more public discussion of the business before the board.

During the April 22 meeting, School Board Chairwoman Lori Dickerson said communication between the board and the public is lacking.

“We have to be able to get our ideas out to the public and their ideas out to us,” Dickerson said.
School Board members Christie and Merrill both declined to comment on specific consolidation plans of the board, deferring to Dickerson, who they said acts as the sole spokesperson for the board. Dickerson did not directly return calls seeking comment, but after speaking to Dickerson, Merrill said the board was declining further comment.

DeBalsi said Thursday that the board has discussed consolidation only “in a very limited way,” and he would encourage them to welcome any schools or districts into a discussion with Hartford.
But while Hartford school officials won’t even publicly name Hartland as a possibility, the clock is ticking, and supervisory union officials are already deeply engaged in substantive discussions with Hartland about what a merger might look like.

Baker said that, at the supervisory union, the rush is on to present options to the public.

“The day the legislation was announced, I got my four board chairs together … we came up with an informational set of slides and a very early draft of a potential proposal. Two days later I brought that slideshow to the supervisory union board and we spent about two hours talking about it.”

In the end, Baker said, he hoped to get voters in the four member towns to understand their options so they could make an informed decision about whether to “take advantage of the early adoption incentives, or wait it out.”

Baker said he’s made similar pitches to persuade Hartland and Weathersfield, which could potentially join the Springfield (Vt.) School District, to stick with the supervisory union’s current grouping.

“I would say they’re a little more proximate to us and they’ve got a little more history with us,” Baker said. “They know the central office players and the principals; they’ve done staff evaluation work together and curriculum work together. It would be easier than going to a totally new set of employees and staff members.” 

News staff writer John Gregg contributed to this report. 
Matt Hongoltz-Hetling can be reached at or 603-727-3211.


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