Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: And here we are, still in committee. Still with Julia Richter.

[Rebecca Holcombe (Member)]: Thank you.

[Emilie Kornheiser (Chair)]: Let's go back where we were. I'm sitting down, chilled. Yes.

[Julia Richter (Joint Fiscal Office)]: I'm Julia Richter, JFO. We're doing a review of Act 73 that's not exhaustive, but focusing on the finance pieces that we worked on a lot in this committee. You all worked on a lot in this committee last year. We worked a lot, too. Supported your work. Yes. So the homestead exemption and the repeal of the property tax credit, this is also conveniently effective 07/01/2028, so FY 2029, along with all of the other pieces that we've spoken about thus far. So we know that under previous law, which is still in place at the moment for this coming fiscal year and the next, that most homestead property taxpayers are eligible for property tax credit based on their income, their household income, and their house site value. And so Act 73 repeals the property tax credit in its current form and establishes the homestead exemption as the new form of income sensitivity. The way this works is by exempting a certain portion of a claimant's house site value from the homestead property tax. And it would be permitted only against the first 4 and $25,000 of house site value adjusted for inflation. The homestead exemption is tiered based on household income, where households with lower incomes can exempt more. So this table may look familiar. This table is outlining the exemption, and on the next slide I have the graph that we use to talk about it. What we're looking at here are the household income. So this is the same definition of household income that we use for the current property tax credit, essentially with some exemptions and whatnot. It's generally the income of everybody living under that roof. So for each household income, there's a certain percentage of their house site that they can apply the exemption against. So for instance, if you had household income of $10,000 you would exempt the first 95% of your house site, up to $425,000 We did a lot of hard work estimating. I think I have a slide here about modeling assumptions that I want to touch on. You'll recall it was extensive modeling and estimated that this homestead exemption that would be put into place in Act 73 would have cost approximately $35,000,000 more than the current law property tax credit in fiscal year twenty twenty five. And all of the statutory dollar amounts associated with this homestead exemption would be increased annually by inflation, which is different than the property tax credit under current law. We know we have those static figures that don't change with inflation unless there's legislation. So this is that visual graph of the homestead exemption in Act 73, what it looked like. So what we're looking at here are this step down bar that's green, is representing the homestead exemption, corresponds The house side exemption corresponds with the left hand axis. On our x axis, we have household income. So you can see that it's stepping down over time, at which $115,000 of household income adjusted for inflation will no longer be eligible for an exemption. This straight blue line corresponds with the right hand axis, which is the cap on house site value for the exemption. So regardless of household income, everyone can apply the exemption up to the first 425,000 square foot site.

[Rebecca Holcombe (Member)]: So the net effect is this will insulate or protect low income households for up to But it will do so by raising the tax rate on people whose incomes are over 120. All else equal, yes. And I do have some slides. I do, in two slides or three slides, have that chart that

[Julia Richter (Joint Fiscal Office)]: you might remember with blue and white of who's increasing to decreasing estimated liability. Before showing those charts, I do want to just put an exclamation mark next to the modeling assumptions. There were a lot of complex modeling and necessary assumptions about how to estimate the impact of the homestead exemption. We won't walk through all of them unless it's helpful, but really wanna talk about we're using FY 2025 data. We're applying that property tax credit in the same year that it's earned, which is different than current law. There's that lag, rejecting income, and only looking at the filers who are ineligible for property tax credit in their current law, Because that is the data that we have available. We don't collect household income data for folks who are not eligible for the property tax credit. So these were the filer groups used in the homestead exemption modeling. None of this modeling has been updated from last session. This is just what we were looking at last session. Here, we're looking at how many households fall into each one of these groups. So for instance, in the modeling, were 40 households that had a household income of 0 to 5,000 and lived in an equalized house value of 0 to 50,000.

[Rebecca Holcombe (Member)]: Do you know the profile of three sixty people who have household income of 110 to 115 who are living in houses worth more than 500?

[Julia Richter (Joint Fiscal Office)]: What do mean by the profile? Who is that?

[Rebecca Holcombe (Member)]: I'm just wondering if we know where in the state they're located. Are those farms? I'm just trying to figure out if we know what would put someone into that profile. Just the people who have relatively lower income, but high value. I

[Julia Richter (Joint Fiscal Office)]: would say there's some information that we know in terms of what is collected on the household declaration form. I'll need to think about if and how I could answer that question, because it is sensitive taxpayer information. In terms of diving into the There's a lot of parameters and ethics regarding what you understand and can't look into in terms of the data. So I would need to talk to the tax department about doing that kind of analysis before

[Emilie Kornheiser (Chair)]: I looked into it. One one place I might think about, like, just mentally cross referencing is Joyce did a report memo. I think it's a report, on the overlap between wealth and income in Vermont, and went a little into folks who have no income but, well, in the state.

[Rebecca Holcombe (Member)]: That's kind of what I'm looking at.

[Emilie Kornheiser (Chair)]: Yeah, yeah. And so that Joyce's report might be a good place to get another sense. And if you can't, you're very good at finding reports, don't need to, if anyone else needs help finding it, just go check and see my

[Rebecca Holcombe (Member)]: She probably would have sent it to us already, thirty seconds ago.

[Mark Higley (Member)]: Madam Chair,

[Rebecca Holcombe (Member)]: have With a

[Edward "Teddy" Waszazak (Member)]: our review on '73, are we, this group, are we looking to make changes to it?

[Emilie Kornheiser (Chair)]: Such a good question, but I so wish you hadn't asked.

[Mark Higley (Member)]: Sorry about that.

[Emilie Kornheiser (Chair)]: I'd say that the agenda, as we've set for the first few weeks, is to dive into solving the problems that haven't been solved yet that are necessary. And we are rethinking, and we can't tack future legislatures and all that stuff. But the topics of the agenda are mostly focused on solving the pieces that were left for this year, like pre kindergarten. And not rehashing discussions that were solved and moved forward from. But No. I mean, it was clearly the elephant in the room, and I appreciate you asking it.

[Rebecca Holcombe (Member)]: Julia? Sure.

[Julia Richter (Joint Fiscal Office)]: So these are the filer groups. This was the estimated average net education property tax for those same filer groups. Basically, that means is, on average, what are each of these groups paying after accounting for the property tax credit? So overall, what are they seeing on their property tax bill on average?

[Rebecca Holcombe (Member)]: Another question, it would be interesting to know what prototypical buckets we pay absent the credit. And that's something the tax could figure out. Yeah. I

[Emilie Kornheiser (Chair)]: don't think I understand your question.

[Julia Richter (Joint Fiscal Office)]: Sure. I guess I would say that if there no If there were no credit, credit I wouldn't

[Emilie Kornheiser (Chair)]: do it for the whole thing.

[Julia Richter (Joint Fiscal Office)]: What would the tax liability be? Guess what I would say is theory, what we would see would be that the liability would be generally the same in each of these columns, because the household income is the primary factor that's impacting the difference in liability. That being said, there may be geographic distribution.

[Rebecca Holcombe (Member)]: That's what I'm wondering, is if there's geographic distribution. We don't know who's in that last column. It may not be. I don't think it's a linear relationship in that last column. But I can talk

[Emilie Kornheiser (Chair)]: to you about this later.

[Edward "Teddy" Waszazak (Member)]: Okay. So

[Julia Richter (Joint Fiscal Office)]: that was level setting. How many people were estimating each of these groups? What was their estimated average liability? And then this was If there were to be a homestead exemption rather than a property tax credit, which of these households would experience a decrease in their property taxes and which of these households would see an estimated increase in their average property taxes. It's important to keep in mind that this is not factoring in that additional 35,000,000 cost of the homestead exemption on the property tax credit. But with that being said, the way to look at this chart is all of these cells that are in blue or shaded are representing a decrease in the average property tax liability, while the white cells are representing an increase in the average property tax liability. And the amount within each of those cells is how much is it estimated on average to increase or decrease. So for instance, any of these, we looked at this one before. Zero to 5,000 for households sitting within that group of household income and an equalized house high value of zero to 5,000. We're estimating to see an increase on average of $52 to the property tax bill at FY '25.

[Rebecca Holcombe (Member)]: I think this is where, I mean, anytime you create a threshold, you incentivize behavior, and so I think this is why it'd be really interesting or important for us to look at those thresholds, just across this policy, but across others, because I think that's part of the effect you're making up here if possible. And I'm not sure we can

[Emilie Kornheiser (Chair)]: solve it. No, no, no. I guess I would just say, it's never perfect for Ode. And this is, for me, is a significant improvement on our current system. Don't disagree. Yes.

[Rebecca Holcombe (Member)]: I'm just thinking as we And it could get better. Absolutely. And also, as we move forward, we're now creating a new set of incentives, we don't know how it's gonna align, because particularly with the big changes that people are talking about, not just here, but across the hall, there could be pretty profound impacts.

[Emilie Kornheiser (Chair)]: And I feel really hopeful about the future report from tax that helps us look above 01/2015.

[Rebecca Holcombe (Member)]: I think we have to. Yeah, of course. Agreed. Yeah, representative. Sorry,

[Edward "Teddy" Waszazak (Member)]: I hate to nitpick presentations in the middle of it. I just want a clarification. On the total about halfway down, there's negative three ninety three and it's in white.

[Julia Richter (Joint Fiscal Office)]: Oh, you. That was me. I had to manually color each one of these cells as I imported it into PowerPoint. That was a

[Edward "Teddy" Waszazak (Member)]: Sorry to hear that.

[Julia Richter (Joint Fiscal Office)]: That was me not thank you for the

[Rebecca Holcombe (Member)]: catch. And

[Julia Richter (Joint Fiscal Office)]: this slide has been shown now. This is probably the tenth time I've shown this slide, you're the first time you've noticed that.

[Emilie Kornheiser (Chair)]: You are stepping into the feltest seat admirably,

[Edward "Teddy" Waszazak (Member)]: thank you. Thank you so much.

[Rebecca Holcombe (Member)]: As you know, Morgan doesn't make any attention to detail.

[Emilie Kornheiser (Chair)]: Apparently, Teddy does, too. Julia, the floor is yours.

[Julia Richter (Joint Fiscal Office)]: Thank you. Yes. So beyond that, that was everything I prepared to talk about in terms of the homestead exemption. To the chair's point, which I didn't include here, but maybe I should have, the tax department is charged with coming back with a further report about homestead exemptions. And that I believe is due to next fall, but I would need to double check what's going on for that.

[Rebecca Holcombe (Member)]: Thanks. Yeah. I know for other tax expenditures, we've been able to map where the benefit goes. It would be interesting to know how this map, too, if that's possible. I don't know if it's possible, but it seems like the state's getting very good with DIS, so maybe. But geographically, what should we Yeah.

[Julia Richter (Joint Fiscal Office)]: I think that would be a great question for the tax department.

[Rebecca Holcombe (Member)]: Do they have all the source data?

[Julia Richter (Joint Fiscal Office)]: Yeah, the tax department owns all of the data, so all of the data that I work with, I get from them or ILE.

[Emilie Kornheiser (Chair)]: And Jake's coming in regularly, but also next week. He thinks a lot. Jake does think a lot, yes.

[Julia Richter (Joint Fiscal Office)]: Back to you. Okay, so now we're moving on to transition mechanisms, which we spoke about or alluded to earlier. These are also contingently effective FY '29, along with everything else that we've spoken about. There are three transition mechanisms that I have decided to speak about here. These are the physical transition mechanisms related to the different areas that we just spoke about. So there's a transition from a district's current education spending to its education opportunity payment. We'll talk about that in more detail. But essentially, it narrows the gap between education spending and EOP over time. There's a transition to the permitted cap of supplemental district spending, which I think we also briefly spoke about, essentially decreasing over time the amount a district may put to voters for SDS. And lastly, there's a transition mechanism included for homestead property tax rates, changing the Or narrowing the difference between a homestead property tax rate pre property tax changes to post property tax changes. And that's a one discount we'll talk about in more detail.

[Edward "Teddy" Waszazak (Member)]: Do you have time lines

[Mark Higley (Member)]: for all of these?

[Julia Richter (Joint Fiscal Office)]: On each one of the next slides. That's a great question. Each one of these The transition to the payment education opportunity and the transition to the homestead property taxes fall on the same timeline, so those would go together. And then the transition for the supplemental district spending is a longer transition timeline. So this may be one of the more weedy slides, because I realized I hadn't put a slide together on this last session.

[Mark Higley (Member)]: What?

[Julia Richter (Joint Fiscal Office)]: I made this slide last night. Who knew?

[Rebecca Holcombe (Member)]: Is there anything left? Love it.

[Julia Richter (Joint Fiscal Office)]: So there's a transition to transition from education spending to the education opportunity payment. Education opportunity payment, EOP, recall this is that foundation formula amount, base times weights, weight and membership that Ezra spoke about. So the way that this is done is that for each year of the EOP transition, so to Rep. Canfield's point, the transition years of FY '29 through FY '33, there's a transition gap that's calculated. That transition gap could be positive or negative. This is done by subtracting the education opportunity payment from the inflation adjusted FY '25 education spending. Essentially, we'll look at the education spending in FY 2025, inflate it forward, and then subtract the education opportunity payment. Of course, if the education spending is higher than the education opportunity payment, then it will be a positive. If it's lower, then it will be a negative. That's called the transition gap. The way that the transition works is that in these four years of the transition, the transition gap is multiplied by 80%, then 60%, then 40%, then 20%, and added to the education opportunity payment. Essentially, it's phasing in education opportunity payment over four years by adding or subtracting the transition gap multiplied by that factor.

[Rebecca Holcombe (Member)]: At the end of last session, we were talking about getting a study done around what an appropriate inflator was. Did that happen? We're still working on it, and we hope to publish it soon.

[Julia Richter (Joint Fiscal Office)]: That's an internal JFO. Yeah. We ran into a few the federal shutdown created some of the other things happening over the summer, and in terms of data, have lengthened our reports.

[Rebecca Holcombe (Member)]: Is the BLS education sector inflation data, is that no longer being produced? I don't know off the top of my head.

[Julia Richter (Joint Fiscal Office)]: So that is the education opportunity payment transition.

[Emilie Kornheiser (Chair)]: Can check. Great. Is it I wonder if when we're done with this, if it makes sense for us all to look at all of the reports together, because and there's a bunch of lists of reports floating around. So if we have time, maybe doing that in the next today or sometime this week, and just figuring out how we want to manage them all. I think we did that last year

[Rebecca Holcombe (Member)]: as well. We did? Okay.

[Emilie Kornheiser (Chair)]: I didn't invent that memory. Great.

[Julia Richter (Joint Fiscal Office)]: That is one I have a final consideration slide, and I think that's one of them, is that there's a whole host of reports that Act 73 requires. Many of those were due by the around this time. Many more are still coming.

[Rebecca Holcombe (Member)]: What do we do, just as a matter of events, when a policy report has funding implications? I have to say, like the special report was devastating because it says that we failed as a state to implement Act 173, and it is going to lead to escalating costs and a higher cost structure every year we report as a maintenance effort. We don't do education, but that has huge implications on how much education costs. It does.

[Emilie Kornheiser (Chair)]: As the most basic answer, we trust the policy committees to be focused on those issues, because we can't do everything, and everything that happens in this entire building has a fiscal impact.

[Rebecca Holcombe (Member)]: How do you fund something that's not being managed?

[Emilie Kornheiser (Chair)]: You look to the policy committee to manage the management. There are, of course, there's lots of nuance in there, and there are places that we can have joint hearings to work on things. That's the other mechanism that we use. And then there's just working with your colleagues in the other committee to make sure that they're paying attention to the things you need them to pay attention to.

[Rebecca Holcombe (Member)]: Julia, your slide. Okay.

[Julia Richter (Joint Fiscal Office)]: The next transition is the supplemental district spending transition. So we spoke about this. Essentially, amounts that a school district is permitted to put to voters to approve in supplemental district spending will decrease over time. The first five years are there's a permitted supplemental district spending percentage of 10%. And then over the corresponding next five years, then it decreases by one percentage point each year until it reaches that statutory cap of 5% of supplemental district spending in FY 2038.

[Rebecca Holcombe (Member)]: Yeah. This of course is hypothetical, because if we have 20% baseline inflation or a huge loss of federal funds, obviously this is all.

[Emilie Kornheiser (Chair)]: I mean, the entire law is mean, hypothetical to some all laws. Not this law in particular. But yes, we have to do the best we can with an unknown future, and a lot of forces outside of our control. And in the best of years, even, that's true.

[Rebecca Holcombe (Member)]: That's also difficult. There is a reason there's a BLS education sector later that is not needed.

[Julia Richter (Joint Fiscal Office)]: The last transition I've included in the slides is the transition for homestead property tax rates. This is also calculated with a transition gap. I call it the tax transition gap to keep the two clear. This also may be positive or negative. The way that this is calculated is by subtracting, taking the FY 2028 homestead property tax rate, and subtracting the assumed FY 2029 homestead property tax rate, that assumed FY '29 homestead property tax rate is essentially what would the tax rate have been if there were no transition mechanism? So we need to include this assumed tax rate because then it becomes a chicken and the egg sort of process. What was the homestead tax rate with the transition? And then again and again. And so we say, Okay, we're gonna calculate what the homestead tax rate would have been absent a transition, use that for calculating the transition gap, and then we use that transition gap to then calculate the final homes and property tax rates. The percentage decrease of those over the four or five years is the same as the EOP transition. Tax transition gap, of course, will be a number of cents. So this is essentially creating a penny discount over those four years to phase in the new homestead property tax rates. We do have a different penny discount under current law, which is phasing in those Act 127, we said, property tax rates.

[Edward "Teddy" Waszazak (Member)]: Silence?

[Julia Richter (Joint Fiscal Office)]: Yeah, think everyone's actually thinking.

[Rebecca Holcombe (Member)]: We're thinking about you.

[Mark Higley (Member)]: Most people are silent.

[Emilie Kornheiser (Chair)]: I think you can go on to the next slide. I

[Julia Richter (Joint Fiscal Office)]: just saw some perhaps perplexed faces, but then nothing

[Emilie Kornheiser (Chair)]: happened. I

[William Canfield (Vice Chair)]: didn't say anything, it's not a specific question,

[Edward "Teddy" Waszazak (Member)]: but I'm wondering about the relationship between the tax transition gap and then the EOP transition, and how those two mechanisms will intersect with each other, and what it means for tax rate and spending. So it's not a specific question.

[Julia Richter (Joint Fiscal Office)]: Okay. I'm happy to speak about it a little bit, if that's helpful. The preliminary modeling that we did last year, these transitions of pee for themselves because we have the higher spending districts and the lower spending districts. So the lower tax rate districts and the higher tax rate districts. So essentially, the way to think about it is everybody is going to be getting the education opportunity payment. If there is a lower spending district that's then being adjusted up, their spending is going to be increased by getting an education opportunity payment. That means they're going to be phasing into getting more money. While, because they're a lower spending district, they have a lower tax rate. So they're going to be phasing into getting a higher tax rate. All else equal. The converse is true with higher spending districts. They're going to be phasing down to the education opportunity payment and also phasing down the tax rate.

[Rebecca Holcombe (Member)]: This may be a silly question, but it's just occurring to me that so the new districts would come into play at the same time

[Julia Richter (Joint Fiscal Office)]: as the EOP. So how are there higher and lower spending districts? That's a great question. And that is part of my spreadsheet of ongoing policy questions that need to be revisited with new districts. So this was created before new school districts were obviously created. And so with new school districts, we will need to revisit how do we calculate the FY 'twenty five tax rate. Is it current law district specific? How do we calculate education spending? But that's something that will need to be considered. Wouldn't that be true for all of

[Rebecca Holcombe (Member)]: the transition mechanisms, though, too? I don't know why that didn't appear to be poor, but

[Julia Richter (Joint Fiscal Office)]: just I think generally, yes. And thinking about education spending, If you're consolidating districts, it's simpler to look at aggregating the education spending of the consolidated districts versus aggregating a tax rate.

[Emilie Kornheiser (Chair)]: One point of reference for this, which is not exactly the same but helped my brain, is the Act 46 transition had some penny discounts related to it that applied to sort of the people who used, like the taxpayers, not people, the taxpayers who used to be in the previous district, not the current district. So that's what I'm saying.

[Julia Richter (Joint Fiscal Office)]: So there's gonna be this weird, like- we gotta

[Rebecca Holcombe (Member)]: be for. Previous underlying districts. Yes. Even after we're in a new district situation for some of these transition mechanisms.

[Emilie Kornheiser (Chair)]: Very much so,

[Rebecca Holcombe (Member)]: yes. You're trying to get

[Julia Richter (Joint Fiscal Office)]: the burden

[Rebecca Holcombe (Member)]: on the tax rate.

[Emilie Kornheiser (Chair)]: And there was like when we I think Brad James left before you Yes. He had this spreadsheet that was really terrifying to look at that had Part of it was because he still had these very specifically highlighted components related to the Act 46 transition, of exactly tracking the old districts and the new districts, and those penny discounts related to These things take a long They time to shake

[Rebecca Holcombe (Member)]: take a long time to shake out. Not a year. No, I didn't. Like I said, a year. No, I didn't. And much people have.

[William Canfield (Vice Chair)]: I'm wondering about how we can influence this before it goes live. We have two objectives here. We heard about them yesterday and I'm not sure we want to focus on them a whole lot here in this committee, but that's up to you, Madam Chair. But I mean, one is the tax burden that I think all of us around the table are hearing from. I hear about it daily, have had more phone calls about the tax burden this second year that we have now a 12% increase expected. People are furious and they can't afford it. The other thing is child achievement. That has decreased through testing, we know, for several years now. And that's bothersome too. So we have the tax burden, then we have, are we getting our money for it?

[Emilie Kornheiser (Chair)]: Gonna spend So lots of time on this year's yield bill. We're gonna spend lots of time on the transition. There have been a lot of conversations over the last couple of years about achievement and what achievement means in this room. It's a really deeply complex issue on how to measure it, why scores change, often totally unrelated to children's experiences, that is so beyond our capacity to learn about in this room. And I think it might be helpful for everyone to spend a little bit of time in the whole body getting their head around it. I'm not really sure how we tackle that as a body, but it's very complex stuff. Let's give some thinking to how, and not talk about it right now, but how we can I'm not talking about that. Okay, great. But just how we can get a little bit more education on that particular aspect of education, not in this room, but somewhere else, because it's important.

[Rebecca Holcombe (Member)]: Yeah. I actually think you should read the second appendix, and I'll send it to you, because it actually addresses some of those issues.

[Emilie Kornheiser (Chair)]: The second appendix what?

[Rebecca Holcombe (Member)]: In the task force report, it talks about what's driving performance. But I'm just going to say on the table, I have a really hard time with us talking about the 12% increase this year, because we did that. We had a 1% increase last year, because we used 120,000,000. I voted against it. I think it was terrible business policy. I'm just gonna be very clear about that. We have a 12% increase because we voted to spend 120,000,000 at one time dollars. Without that, we would have been a 6% increase. Still high, but it's a very different issue. And when we keep voting for things like CHIP, and we keep voting for other stuff out of the Ed Fund, we are going to raise tax rates. And so this has to be about all of our decisions and not just about that one number. And that's the only number I'm hearing people talk about, and I think it's a made up number because we did Just gotta be really clear on that one. Schools did not still sit in

[Julia Richter (Joint Fiscal Office)]: the district.

[Emilie Kornheiser (Chair)]: We're not talking about the yield bill. We have a lot to do this year, and I know everything is deeply interrelated to each other, particularly in this room. We are going to talk about the yield bill

[Rebecca Holcombe (Member)]: next week. I think that's what I'm not

[Emilie Kornheiser (Chair)]: asking you. I'm looking into the ether of the calendar in my mind. So let's focus on the property tax rate transition to the best of our ability. Yes, Represent was acting oppression. Transitions.

[Edward "Teddy" Waszazak (Member)]: I remember during our late afternoons when we were voting four fifty four, did the house version of the original house version of act 73, just I'm trying to remember history, did it include all three of these transitions? No. And that's what I thought. Okay.

[Julia Richter (Joint Fiscal Office)]: But I thought I was remembering it. And I don't remember which were added where. Emirates, we've sort of,

[Emilie Kornheiser (Chair)]: to some degree, explicitly said, Let's ask the Senate to build out a transition.

[Edward "Teddy" Waszazak (Member)]: Because I remembered SES specifically. Just don't remember where the other pieces came out.

[Julia Richter (Joint Fiscal Office)]: So that was it for transitions. I have one final slide here for considerations. I think we've already spoken about all of this, just flagging that many of these Almost all of the pieces that we spoke about in greater detail are contingently effective on outstanding policy work. So those primary contingencies for the pieces we spoke about are the new school district boundaries and the updated cost function report, which there was some conversation about earlier. So for these pieces to come into effect, further policy work is required. In addition to the reports and everything that I think you're going to be talking about soon that have come to all of you from Act 73 requirements, there's additional ongoing work that Act 73 requires beyond this legislative session. So there are requirements for reports and research and policy thinking from a variety of entities and a variety of topics over the coming years. Some of these topics I've listed here. And that is it. I want to just point to, at the end of the slide deck, there's a hot link to the fiscal note. And then there are two hot links to the more detailed presentations outlining supplemental district spending. Exactly like how does the mechanism itself work. There's some basic calculations explaining it in there, and then more slides about the Homicide exemption.

[Rebecca Holcombe (Member)]: Thank you. Another question about the ongoing work. In the RFP for the consultant to do additional work on the foundation formula or any place else, is there any place where someone is supposed to conduct professional judgment panels? Or is

[Emilie Kornheiser (Chair)]: it only cost factor analysis? I'm actually gonna answer that because I found something out today that I remember that we were talking about that I haven't. So professional judgment- mean, your dates in statute, I think accidentally. And so, asked them to bump. They had it out for this year. So we asked them to bump it so that that work aligns with the work that JFO is contracting. But I'll have you go into greater depth about the JFO contract.

[Julia Richter (Joint Fiscal Office)]: Sure. JFO is not charged with doing any professional judgment panels. The language explicitly asks for this cost factor analysis, technical premise cost function. So it doesn't charge JFO with doing the professional judgment panel, so that would be outside of the scope of work we've been asked to do. That being said, Act 73 does include, to the Chair's point, requirement of professional judgment panels to review the foundation formula.

[Emilie Kornheiser (Chair)]: And so AOE was originally charged with issuing an RFP right now to do that, which doesn't make sense given the timeline of the JFO report. And so they're actually asking for a slight tweak in statute for us to put forward so that we can move the date to a time that actually makes sense.

[Rebecca Holcombe (Member)]: Okay. But remind me of the date when that work is supposed to be done for the

[Julia Richter (Joint Fiscal Office)]: JFO report? Yeah. The report is due to you all December 2026. I don't remember if it's the first or the fifteenth. As Ezra mentioned, we're under the process of contracting for that report. We submitted an RFP in the fall, and then responses. We We had follow-up questions that the respondents needed to respond to us for. We then conducted interviews, and now we're hopefully at the final stage of the process. As soon as we have a contract, we'll let you all know. The RFP and the follow-up questions, I'm happy to share with the committee. It's posted on the JFO website. We base the scope of work on the language that was spelled out in Act 73.

[Rebecca Holcombe (Member)]: Would it be helpful to ask you to explain the difference between a professional judgment panel and an evidence based model? Because I think that was a point of confusion for some people. I'm

[Julia Richter (Joint Fiscal Office)]: happy to. There are multiple ways of determining a foundation formula in corresponding amounts. There is the cost function analysis, which is what the numbers corresponding that were put into Act 73 are based off of and the report that JFO is required to conduct. There's also an evidence based approach. These are the titles of the approaches. It's called an evidence based approach, evidence based modeling. And essentially, it's building blocks, trying to cost out based off of evidence how much education would cost. And then oftentimes, that evidence based approach is paired with a professional judgment panel, which is taking the findings of the evidence based approach and going out to the field and asking for review suggestions.

[Emilie Kornheiser (Chair)]: There's a great presentation from last year from Rebecca Sibilia that I think is one of the best foundational building blocks of explaining things like that.

[Rebecca Holcombe (Member)]: I think the difference is that what a professional judgment panel picks up that the evidence based model doesn't pick up is the reality of state policies, because what works in the evidence isn't actually what we're doing here. And we make a lot of requirements on districts that other states may not make. Purpose of a professional judgment panel is to read your estimates, not in a hypothetical state with a lot of schools of 800 kids, but in the reality of what we actually do and

[Emilie Kornheiser (Chair)]: what we require kids. And I don't think the evidence based model is anywhere in

[Rebecca Holcombe (Member)]: the statute. No, but it's what the secretary has been talking about. Yes, but it's not

[Emilie Kornheiser (Chair)]: in the statute. That is correct.

[Rebecca Holcombe (Member)]: Sorry, Rob Higley.

[Mark Higley (Member)]: I just have a question in regards to some of the stuff that we're going to be looking at, or a lot of the stuff that we're going to be looking at, but in particular the tax department report on the new category.

[Rebecca Holcombe (Member)]: This is

[Emilie Kornheiser (Chair)]: not a question for Julia.

[Mark Higley (Member)]: I'm sorry?

[Emilie Kornheiser (Chair)]: Is this a question for Julia?

[Mark Higley (Member)]: Oh no, which I am.

[Rebecca Holcombe (Member)]: Thanks, Julia. Yeah, you're welcome. Thank you very much. I'll stay here in case. Okay, thanks. Is it a question about a report? Yep. Okay, I'm gonna ask you to hold it for one second.

[Emilie Kornheiser (Chair)]: Beth has a comprehensive list of reports. We also have a report tab, our website. One way we can have this conversation is all just sort of go through that together casually. Another way would be to get slightly more organized and have a list that we project up that everyone gets to look at in advance so that we can have a discussion of how we want to manage each of those reports from there. That one feels slightly better to me.

[Julia Richter (Joint Fiscal Office)]: Yeah, super good.

[Emilie Kornheiser (Chair)]: Mark, what was your

[Mark Higley (Member)]: So again, a lot of it in that report to me is not our bailiwick. I mean, it's DevOps. When it comes to an attestation, does it go to the town, does it go to the state? Penalties. So are we going to handle the whole thing or are we going to reach out for some consideration?

[Emilie Kornheiser (Chair)]: We're going to look at the report together next week. And then I think last year, they did a

[Julia Richter (Joint Fiscal Office)]: Drive by.

[Rebecca Holcombe (Member)]: We don't call them that anymore.

[Emilie Kornheiser (Chair)]: That's why I paused awkwardly.

[Mark Higley (Member)]: Table room in-depth.

[Rebecca Holcombe (Member)]: We're gonna check it out.

[Emilie Kornheiser (Chair)]: And so we can figure out what makes the most sense, maybe after we see the report next week, about if it makes sense to do joint hearings or have them spend time with us spend time

[Julia Richter (Joint Fiscal Office)]: or whatever we want to do.

[Mark Higley (Member)]: Okay, thanks.

[Emilie Kornheiser (Chair)]: So I'm gonna have us end now and ask folks to take some time to look at that reports tab and to I'm gonna figure out the best way for us to put together that list of reports. And then we can talk about it the next time we have some moments.

[Rebecca Holcombe (Member)]: Can I just add on the reports tab? It's counterintuitive, but the most recent is at

[Emilie Kornheiser (Chair)]: the bottom of the category instead of at the top. They've been trying to switch that, but just scroll down. And then the bottom of each, yeah, to temp, like departmental taxes, the newest ones are at the bottom category. Of Beth, gave us a list of all the Act 73 reports.

[Edward "Teddy" Waszazak (Member)]: Just clarification, are you looking for just reports that have come out since the end of last session? For purposes of this conversation?

[Emilie Kornheiser (Chair)]: Yes. Just checking. Reports that might come out sometime in the next couple weeks. Okay.

[Mark Higley (Member)]: Great. Or as Julia was referring to, reports that are coming out in December.

[Julia Richter (Joint Fiscal Office)]: Yeah. Yeah.

[Emilie Kornheiser (Chair)]: Okay. Thanks, team. See you at 01:00.