Vermont Legislature SmartTranscripts:

[Speaker 0]: Good

[Emilie Kornheiser (Chair)]: afternoon. Today is Tuesday, January 27. Here are the Ways and Means Committee, and we are continuing our work on the yield bill. We have some updates from school budgets, as we usually do this time of year. And so from now until we pass the yield bill, we'll have the agency of education come in regularly and give us updates on finalized budgets and finalized numbers. So we're going to hear from the agency of education, and then we'll hear from Julia Richter about how all of that fits into what the yield bill might look like and the education fund outlook. And then at 03:15, we're going to go back to impacts of federal changes this summer, because we have not yet talked about the provider tax, which is going to stop there. So with that,

[Unidentified committee member (primary diarization for Speaker 2)]: Ted, Kelly, would you like to join up? Or just one of you, however you seek to. So

[Kelly Murphy (Agency of Education)]: Ted's going to stay over there, but if I need to find a friend, he's available. And I am going to introduce myself at all. This is my first time actually in committee. Well, I've been here once. Kelly Murphy, I am the education finance director with the Agency of Education. And so I had the pleasure of being introduced last time around. And so now I'm here to give you a brief overview of where the school budgets are. We did submit a memo, which I believe has been put up on the committee page. But I'm also just going go ahead and share my screen, just kind of run through the talking points. And as I sort of mentioned before, I've got Ted Gates, who's the senior fiscal analyst here with me too, so if you have any questions, she can help you with them. So I'm going to share my screen. Okay. So this hopefully looks familiar, sort of, from what we presented in years past. And so the intent for today really is just to kind of provide you with an overview of what we have so far. And then also to maybe get a little bit of feedback if you'd like to see the data in a different way. But I wanna make sure that what we're bringing into you when we report out regularly is the same thing every time. So there's a point of reference. And so within this memo, just the brief introduction at the top here is that we're still in the first of really two essential collection collection periods. Periods. So So this this first first one one is is pre town meeting, but board approved budgets. And the second collection will be once it's gone to the voters at town meeting and we will bring those in April. And so this collection, the due date isn't until February 15, but we've got some schools that have already reported. So we wanted to get you the information as soon as we have it. And then just also wanted to make sure that this is a good format. So as you can see here, we've received 29 records to date. Of the 29, seven are still pending superintendent signature, but we have included them in the analysis just because I think it's important at this point, but we'll update them as they become finalized. So we have 29 of the 119 in, which is about 24% of those budgets at this point. And so it's a good showing at this state, but we'll be bringing more in soon, which leaves 91 left to come in. We did also do a comparison with the ADM. And so we're at about 32% over FY '26. And then this last bullet is just where we stand in comparison to the December first letter. So the education spending was projected to be about 5.8% based on what we received from the districts. Based on the small sample set of 29, we're at about 3.5%, which is a good indicator, but it's very, very premature. And I don't know that we'll stay there, but maybe we will. Just want to put that caveat on it. One thing

[Emilie Kornheiser (Chair)]: that we've also looked at in previous years in terms of the percentage of what's come in is, in addition to the percentage of long term weighted ADM, also the percentage of total spend that that usually represents, because that can sometimes be more useful in terms of what we're Totally. We can make

[Kelly Murphy (Agency of Education)]: sure that we include that in future bullets. That's really helpful feedback and that's exactly what I was hoping for. So if there's something you want to see, we're happy to bring it in. So then we prepared a couple of tables just based on what we've brought in in the past. And again, we're happy to amend these in any way that you'd like us to. These are reflective of what the high level overview collection looks like. And so this first table is warned budget data. Again, it's only 29 districts of the 119. But what you see here are the budgeted expenditures, offsetting revenues and then education spending. And so we have included a column for the dollar change, but then also the percent change. And so what you can see is that the expenditures are coming in pretty favorable right now at 1.9%. But you also see a reduction in revenues, which sort of has the same kind of impact as what spending would. And then education spending overall, the comparison is at 3.5%. And later in the week, we're taking testimony on reserve guidance.

[Emilie Kornheiser (Chair)]: And I think the difference in reserves and how reserves are used might be a part of offsetting revenues. I wonder if you have a sense of other pieces that might contribute to that reduction.

[Kelly Murphy (Agency of Education)]: We can certainly look into it and bring it back, for sure. And that factor of using some of those revenues to offset taxes is something that we're seeing within the collections at the school district level. Then table two is just sort of an overall perspective of what education spending would be. We took the 29 districts that reported, We then took the remainder, the 91 districts, and included the 3.5% average that we received and then came up with sort of a detail here on education spending, roughly 27. Just a projection, not sort of a full forecast, but just to show you what it would look like compared to FY '26. And so that brings you a little surprise. There's a small sample set there, but a 3.5%. Just to note, if you were to compare, say, the December 1 collection of the 5.8%, the delta with FY27 is about 45,000,000. So I just wanted to highlight that for you. I'm also happy to expand this table a little bit. So it does include some of those points that you're used to for reference that you can kind of see it in the table rather than having to report. So that's what we prepared for today. If there's additional information you'd like, or if you have any questions, happy to take them.

[Unidentified committee member]: I'm sorry, you say five point eight percent and forty five million. Could you repeat that? Don't understand. Happy

[Kelly Murphy (Agency of Education)]: to. So if you look at table two and you look at FY27, so that's representative of a 3.5% increase in education spending.

[Unidentified committee member]: It remains statewide. If these other folks had submitted, that's what it would be.

[Kelly Murphy (Agency of Education)]: If they were at, yes, if we assume that they were at 3.5%. And so then if you wanted to compare that to what we were seeing back in December. And it's not noted here, but I'm happy to provide the indicator for you so you can see the side by side. That would have been It was about 2.104. So here you've got the 2.05. And so then that's where the delta comes from, is if you were to compare those two points in time. And so what we're seeing, is that it's the 5.8% growth versus the 3.5% growth and what that means in dollars. And I didn't put it in the table. Actually, Ted and I were talking about it before we came over that it might be a nice point of reference. So I thought I would mention it. And then I'm also happy to put it in for the next iteration.

[Rep. Mark Higley]: With 24% of the vote cast, a lot of news organizations call the election. So if you're looking at that in the past, how much has the agency been confident at this point? I know it's preceeds your tenure, but and saying that's where it's going to come out.

[Kelly Murphy (Agency of Education)]: Oh, it's way too early.

[Unidentified committee member (primary diarization for Speaker 2)]: I think

[Kelly Murphy (Agency of Education)]: it's a good indicator, but I do not think that it's statistically significant at this time, just as we don't have enough districts in to call it.

[Rep. Mark Higley]: It's really surprising just to see 1.9% given all the pressures on wages, healthcare, everything else. Yes. So I mean some pretty strong cuts are going

[Unidentified committee member (primary diarization for Speaker 2)]: on somewhere. Yeah, mean, we

[Kelly Murphy (Agency of Education)]: could also get into talking about which districts are in because that also would play a role in what that means. So this

[Speaker 0]: is really high level at this point.

[Emilie Kornheiser (Chair)]: And that's why the proportion of spending is as useful as the percentage of long term median.

[Unidentified committee member (primary diarization for Speaker 2)]: Any other questions? Yeah. I did have one question. We've been looking at the outbound outlook that has a long term weighted average daily membership of about 141,000 this year. Has that changed at all from December, from another that time period? I guess, overall, my question is, how much are we still seeing student population decline? Or what's an estimate? That is an excellent question. We are projecting a decline. And I

[Kelly Murphy (Agency of Education)]: think we would probably go with what we've got in the ed forecast at this point. So I think we're at 142 or so. But I'm happy to provide additional detail in a future version. It would

[Emilie Kornheiser (Chair)]: be great to include it in a future version, and then when we take testimony on Count J. Hughes on Thursday, maybe we can add it to that as well.

[Kelly Murphy (Agency of Education)]: Thank you for the question.

[Unidentified committee member (primary diarization for Speaker 2)]: Thank you so much.

[Speaker 0]: Good afternoon. I'm Julia Richter, Brad Pitt School Office. There are a few documents on the committee page under my name. There's the Education Fund Outlook and the annotated guide, which I've just started including every time that we have an Ed Fund Outlook. Then a slide deck. Madam Chair, would you like me to share the Ed Fund outlook? The Education Fund outlook that I've got

[Emilie Kornheiser (Chair)]: on the committee I'm gonna Sorry. I think when we originally created this testimony plan, I thought that Adam Gresham was gonna have come in already to talk about the governor's budget, but that all got shuffled around because that's how life works. And so Julia is somewhat awkwardly the deliverer of the governor's proposal. So Julia does not work for the governor yet, just so you all know. And Adam's coming in tomorrow. And Adam's coming in tomorrow.

[Unidentified committee member (primary diarization for Speaker 2)]: At some point soon. Sorry about that, Julia.

[Speaker 0]: You. No, I appreciate the the reminder you haven't heard this all yet, and the reminder that I'm nonpartisan.

[Emilie Kornheiser (Chair)]: I don't have a slide about it, though, because you're just sharing the outlook.

[Speaker 0]: I'm just sharing the outlook. So I'll go ahead and share the outlook now. So as the chair spoke to, I was asked to come in and bring an education fund outlook that reflects the governor's budget proposal, in addition to the emergency board update. Before walking through what is and isn't included, I want to draw the flag. There were some questions about the long term weighted average daily membership. We did just receive the almost final, but still preliminary long term weighted ADM file from the agency. Out of an I decided to present this outlook here today because this is the outlook that was presented in Senate Finance last week that was also showing the governor's recommended proposal. So I thought, rather than shake things up based off of a new data point, I would wait until next week when we get a chance to digest this.

[Emilie Kornheiser (Chair)]: So even if we don't have any new ideas between now and next week, next week, things will look slightly different because we have the updates of the number of students. Exactly.

[Speaker 0]: And as you'll all recall, that's very consistent with this iterative process. As AOE starts coming in with even more budget information, at some point, when it starts to be showing a trend, we'll be updating the estimated education payment, we'll be putting in the updated long term weighted average daily membership, and we still need to put in the updated grant list information. So there are those data pieces that are still outstanding, and nothing has been adjusted since I was last in the chair, other than to include the GovRec proposal. So the first thing I want to flag is FY 2026. This is a new FY 2026 column for you all compared to the last time I was in here, and this is because it's reflecting the Budget Adjustment Act. The only piece of the BAA that really is impacting the education fund is the change to the universal school meals appropriation. There was 18.5 appropriated in FY '26. For universal school meals. The cost is coming in under, so the BAA includes that down by 1,000,000, just so that money is back into the education fund. So with the decrease in the appropriation, assuming the BAA, we then see that there's another million estimated to be on the bottom line in FY26, compared with the 21,000,000 that we had on

[Unidentified committee member]: the

[Speaker 0]: bottom line for the presentation to the e board. So then this middle column, FY 2027 emergency board update, I've already come in here to talk about that. You'll recall that really what the e board update was, was adjusting those non property revenue sources per the latest revenue forecast, and then resolving the yields and the rate to fully fund the education fund in accordance with the December 1 letter model and parameters. So moving on to the Rec. This is our far right column. So this is reflecting the GovRec proposal. As you'll recall from prior years, all of the policy choices, outstanding choices, we shade here. That's in blue. So shading to really highlight what we're looking at. So I'm gonna walk through first what are the inputs before talking about the outcome. So really, primary inputs are to the sources in the gov rec. So there's the recommendation to decrease the amount of ongoing purchase and use tax revenue to the education fund and backfill it with one time $10,000,000 of general fund to account for the FY27 poll. The GovRec budget also includes approximately 105,000,000 in one time general fund to buy down the property taxes. And that would be in addition to the $22,000,000 of education fund surplus that's already being used in this modeling. Can you help

[Emilie Kornheiser (Chair)]: me understand why line eight and line nine are separate lines, even though they're both general fund transfers? Sure. So line eight If you're like, I'm not going

[Speaker 0]: to explain the governor's thinking, so ask him. I'll explain why I am carrying them separately, and I will let the governor's team explain why they're proposing this. These are carried in different lines because they are one time general fund money being used for different purposes. Line eight is the $105,000,000 that's being proposed to lower property taxes. Line nine And so I guess I will say line eight, that's similar to the $77,800,000 that was used in FY26 and the $25,000,000 that was used in FY25. Line nine is distinct from that because this is one time general fund money that is not being used to lower property taxes, but instead is being used to backfill the purchase and use revenue, ongoing revenue that's being taken out of the education fund in the proposal. So as we know, the FY27 proposal is to transfer 10,000,000 of the one time Maybe we don't know because you haven't had the commissioner yet. But the proposal is for $10,000,000 of purchase and use tax revenue to begin this transfer of this revenue out of the Education Fund. And so the administration proposes to use one time money in FY27 to backfill that ongoing transfer out.

[Unidentified committee member]: She's wait till she's finished, or she's

[Unidentified committee member (primary diarization for Speaker 2)]: gonna ask any questions

[Unidentified committee member]: now. So She's here, so it's okay. But we heard from in our pockets, I'm assuming these are something also about that. But on this paper, it it uses 74,500,000.0, and one of the purposes is to property tax relief. So is this money you've got in addition to the 180,000,000 fraction that you just mentioned?

[Speaker 0]: I'm not sure, just big caveat, I'm not part of the JFO budget team, so really nuanced BAA questions, I may defer to them. I'm not sure the $74,000,000 that you're talking about. What I think that you're referring to is a few years ago, there were $13,000,000 in one time money that was set aside in an additional reserve, in a tax rate offset reserve. The following year, that money was used to uniformly lower taxes. So the money was taken out of the reserve and used in the calculation of the yields. So it's already been spent. However, there was a technical mix up that we all missed, where that money was not unreserved, even though it was used. So that $13,000,000 of tax rate offset that's included in the BAA is just a technical correction to make sure that we actually are unreserving the money that we already used. So it's purely technical, and that policy choice to use that 13,000,000 was

[Rep. James Masland]: Like three

[Speaker 0]: years ago? in the prior biennium. Another

[Emilie Kornheiser (Chair)]: piece that might have come up about BAA is that there was a proposal to use BAA to apply to the yield bill for this upcoming year. And the committee decided since, out of respect to ways and means and the fact that we had barely started the yield bill, to say, we'll leave that money on the table for the budget and yield bill conversation and not sort of preemptively make that decision now. Respecting that it's really important to keep property taxes as low as possible. And it was just, like, very early to make that decision since we didn't even know what education spending was gonna look like yet. So that money was sort of just carried forward for the budget.

[Unidentified committee member]: Okay. That's helpful. Thank you. Thank you.

[Emilie Kornheiser (Chair)]: Represent Masland.

[Rep. James Masland]: Yeah. I've been asleep here, Julia. Where's the 13,000,000 on this sheet?

[Speaker 0]: You haven't been asleep. We haven't spoken about it. It's actually not showing up on this sheet because it was prior to f y twenty six.

[Rep. James Masland]: I feel better.

[Speaker 0]: So if there was an FY23 I think if there was an FY25 and FY24 column, then we would see the tax rate offset reserve.

[Rep. James Masland]: Thank you.

[Unidentified committee member (primary diarization for Speaker 2)]: Representative

[Rep. Mark Higley]: Higley, you? That money you're talking about is that $74,000,000 that's kind of being held.

[Emilie Kornheiser (Chair)]: Is it 74?

[Rep. Mark Higley]: Thought I heard that.

[Unidentified committee member (primary diarization for Speaker 2)]: Be Sure. Yes. 74% is budget context.

[Emilie Kornheiser (Chair)]: Great, yes. Oh, everyone Well, caucuses got the same sheet. Look at that. I love that.

[Unidentified committee member (primary diarization for Speaker 2)]: Is general.

[Speaker 0]: Different reporter, same newspaper.

[Unidentified committee member]: Thanks. Sorry, think you already said this. Remind me how the Sandy Barb turns into the person before turning to law four nine which general fund is final? So

[Speaker 0]: that's additional the 70.9 is included in that, but then there's additional monies.

[Unidentified committee member (primary diarization for Speaker 2)]: Where does the

[Unidentified committee member]: rest of the money

[Speaker 0]: I would defer to the Somewhere

[Emilie Kornheiser (Chair)]: in the general fund, else was cut.

[Speaker 0]: I mean, I guess I would. The one piece that I would note is money is fungible. I'll just leave it at that.

[Unidentified committee member]: Also curious as to how many times you can do a one year buy down, also buying at a one time buy down.

[Rep. James Masland]: Another question for Chittenden.

[Emilie Kornheiser (Chair)]: I she enjoyed it, though.

[Unidentified committee member (primary diarization for Speaker 2)]: So, please, do you have something before we question?

[Rep. Mark Higley]: During our caucus, we did hear representative Chai say there was another $30,000,000 that was reserved. So it has to be the extra $30,000,000, but I don't know. So I don't know what the source of it is.

[Speaker 0]: I would need to defer it up. And if I was an incredible budget team, or I could check-in with them and follow back up, but I'm not. I think we're

[Emilie Kornheiser (Chair)]: going hear from the administration and the budget too.

[Unidentified committee member]: On these amounts of money because I thought the $30,000,000 was set aside for future catastrophes. So there is

[Emilie Kornheiser (Chair)]: money that was set aside

[Unidentified committee member]: It's always gonna be. I'm not gonna get

[Emilie Kornheiser (Chair)]: the exact numbers because it's not how my brain works. So there was money that was set aside in last year's budget to deal with reductions in federal spending. We spent some of that this summer on food stamps during the government shutdown. Some of that is going towards Section eight in this budget adjustment. So there's money left over from that that's being carried forward into this budget. One of the things that it was reserved for was education stuff last year. So some of that could be carried forward into that, but money is fungible. It's just money in the budget that's being carried forward into the budget.

[Unidentified committee member]: Okay. And we're not touching it because we don't know what we might need it to.

[Emilie Kornheiser (Chair)]: We're not touching it on budget adjustment because there are still lots of decisions to be made.

[Rep. Mark Higley]: Yeah. What

[Emilie Kornheiser (Chair)]: row were you on?

[Speaker 0]: So we spoke about the differences in lines eight and nine. We spoke about row four, the purchase and use tax. Those are the changes to FY27 for GovRec compared to the e board. As we see, I solved the yield model for a uniform average bill change. Of course, this is a policy choice. I did this so that y'all can see what it would look like. So the uniform average bill change using this additional money would result in an estimated average bill increase of 5.5 compared to the estimated 11.9.

[Emilie Kornheiser (Chair)]: Can we talk more about the purchase and use decrease in revenue and the impacts of that? We set aside row eight and nine and the general fund transfer. Because I appreciate the artfulness of making them two separate rows, like the administration making them two separate rows, but they're one time general fund transfers to buy the property taxes. So I'm sorry. I'm just going to finish making my point. Because the administration could have just decided to make a general fund transfer to the transportation fund, but they decided to funnel it through the Ed Fund. But money is fungible.

[Unidentified committee member (primary diarization for Speaker 2)]: Am I correct in meaning that I heard somewhere that the intent is that they would continue to phase it back another $10,000,000 So what we're talking about is we'll be in January hole next year, plus they're going to take out another $10,000,000 next year from purchase and use. So the hole to start with budgeting next year would be one hundred and forty seven months. If spent, hypothetically speaking, yeah. Yeah, if they spent everything that we said we were going spend, so there's going to be surplus next year.

[Emilie Kornheiser (Chair)]: And did the transfer, yes. Yeah.

[Speaker 0]: So how

[Emilie Kornheiser (Chair)]: does the moving of the purchase and use affect all the rest of it?

[Speaker 0]: So just talking about the moving of purchase and use for a moment. We know that the Education Fund is a self leveling fund, and that the way we determine how much needs to be raised on property taxes is calculated by taking the total expenditures out of the Education Fund, reducing them by the non property revenue sources, and the rest needs to be made up with property taxes. By decreasing the non property revenue sources going into the education fund, by decreasing purchase and use going to the Ed Fund, that's less non property tax revenue going to the education fund, which means, all else equal, that amount needs to be raised by property taxes. So holding everything constant, that will increase property taxes. The other way to think about this is, yes, most money is fungible. Here we have 115 this construct, 115 of one time general fund being transferred into the education fund in this proposal. If the purchase and use tax were not being decreased by $10,000,000 then that $10,000,000 transferred to the General Fund, transferred to the Education Fund, could be further used to lower property taxes. So lines four and lines nine for FY27 are netting out with each other. From a fiscal perspective, they're not fully netting out, because one is one time and the other is ongoing. And of course, if, for instance, purchase and use tax were to not be decreased, then the $10,000,000 could be used. That being said, if purchase and use were to like in this proposal, the $10,000,000 is making up for the fact that PNU is being decreased in FY 2017.

[Unidentified committee member]: Can someone remind me when the

[Unidentified committee member (primary diarization for Speaker 2)]: the three split, way split of purchase and use was put into place?

[Emilie Kornheiser (Chair)]: Julia's gonna I do not

[Speaker 0]: remember off the top of my head. My colleague Logan Mooberry, who's a transportation analyst, has done a ton of research into purchase and use and tracking a bit over time. So I think it might be helpful.

[Emilie Kornheiser (Chair)]: There was a memo or a presentation about the who did better in the deal kind of conversation. That is, I'm sure, not how Logan would phrase it, and we can schedule in for testimony on that.

[Unidentified committee member (primary diarization for Speaker 2)]: Question is, we are increasing practices, I think, in the economy, so that was a budgeting interesting business practice, let's put it that way.

[Emilie Kornheiser (Chair)]: Great, I'm looking forward to talking to

[Unidentified committee member (primary diarization for Speaker 2)]: to Adam about it tomorrow.

[Unidentified committee member]: So

[Rep. Mark Higley]: the educational spending, which is from the AOE in a way that the spending may not be the full increase that was anticipated in the December 1 letter. But your education outlook still assumes that December 1 number, correct?

[Speaker 0]: Yes. So we're talking about line 12. So to Kelly's point, it's too soon to tell what that means. And so we are continuing to carry the estimated Ed payment from the December 1 letter. Once we're further down the road and the AOE feels more comfortable in terms of the directionality and perhaps the scale, then we will start to adjust line 12.

[Unidentified committee member]: But we could assume that sometime out in the future that line 12 will go down, right? Because somebody said, well, the local boards are cutting like crazy to get down to 3.5.

[Speaker 0]: I would defer to the agency. My understanding is that while preliminary

[Rep. Mark Higley]: collections

[Speaker 0]: look like it's down compared to the December letter, we don't have enough information to be able to estimate or determine a relationship. So this is an interesting point in time. But from modeling or statistic standpoint, it doesn't mean a whole lot right now, because we really just we don't know. We don't have enough information about it.

[Emilie Kornheiser (Chair)]: It's possible that the districts that came in tend to be lower spending districts, the districts that haven't come in yet tend to be higher spending districts. This is, like, by way of an example of how The number could still could be above the December 1 letter, and we just don't know yet.

[Unidentified committee member]: And, madam chair, I don't wanna end up in a situation where it's spending on students that ends up paying for this $10,000,000 moving over to transportation fund. I really don't for the sake of the Ed fund. However, I want to remind everybody that when we transfer money into the transportation fund, it gets multiplied by four because of the way their federal bank awards. So we're kind of at the point here, but I really, really don't want to see this coming out of the kids' what is the term I want to use the student

[Unidentified committee member (primary diarization for Speaker 2)]: cost. Yeah.

[Emilie Kornheiser (Chair)]: No, we have two funds that are in deficit, and I think if the general fund budgeting worked differently, that fund would probably be considered in deficit too, but we just don't budget that way.

[Unidentified committee member (primary diarization for Speaker 2)]: Yeah, Representative Waszazak.

[Rep. Mark Higley]: Just one more question, the last question.

[Unidentified committee member]: The one quarter meals and worms tax, how

[Rep. Mark Higley]: long have we been splitting that?

[Speaker 0]: That I also want to follow-up on. But we can certainly come back and do some sort of whether in testimony or following up via email, the history of those references.

[Unidentified committee member]: Just heard the money is fungible. We're going to go down this road, we should be having an honest look about where our money is going, which funding is paying for, and just be more honest about our budgeting. I don't think that that's always been true, and I will remind everyone that there

[Rep. Mark Higley]: is a

[Rep. James Masland]: bill on the wall

[Unidentified committee member]: to bring

[Unidentified committee member (primary diarization for Speaker 2)]: $100,000,000,000 here. Representative Holcombe? I appreciate that the agency brought in the offsetting reserves. I was just hoping that when they come back and the budgets are in, we can continue to have information on offsetting reserves. You mean offsetting revenue?

[Rep. Rebecca Holcombe]: Revenue, sorry, revenues, yes. What I'm concerned about is there was a lot of talk last year, and they voted on their budgets before we passed the yield bill and bought down the tax rate. So I think there were people who bought down last year, who then Can't this year.

[Kelly Murphy (Agency of Education)]: Can't this year, because

[Rep. Rebecca Holcombe]: they already spent their reserve or their revenues.

[Rep. James Masland]: On

[Unidentified committee member (primary diarization for Speaker 2)]: the

[Emilie Kornheiser (Chair)]: average bill change, or the average rate,

[Unidentified committee member (primary diarization for Speaker 2)]: average bill. Do

[Emilie Kornheiser (Chair)]: you have a sense of, like, the range when you're doing that? Are you able to sort of create that to share with us?

[Speaker 0]: That's something that something that we've we've thought a lot about and talked a lot about is incredibly challenging. And that is because if you think about all of the inputs that go into determining a person's property tax liability, talking about value of the property, which changes depending on the growth in the grant list, both within the state and within that community. If it's a homestead property or an income sensitized taxpayer, it's based off of, in addition to their homestead value, their house site value, their household income, how their household income has changed over time. And then in addition to that, it's also impacted by the local property tax rates and how they have changed year over year. And then if you think about all of the different combinations, like just thinking about homestead taxpayers, we're thinking about a whole slew of different combinations of house site value, homestead property value, tax rates, income. So very open to ideas of a different way to get in deeper to that, but I haven't been able to find a way to make a range.

[Emilie Kornheiser (Chair)]: And then something else that I've been getting a lot of questions from folks about is different ways we can apply the general fund transfer. And I don't you know, it might be helpful to do this next week, but what happens when we apply it just to the homestead? What happens when we apply it just to the income yield? And I think we did this last year, but it's, I think, a worthwhile exercise to understand all of that. Yeah, absolutely. I can certainly come back and Would that be interesting to other people? Yeah.

[Unidentified committee member (primary diarization for Speaker 2)]: So I guess the concern I have is that the instability is its own demon, because the message to people that they're spending too much is not their tax rate, or their tax bill goes up, and then they vote on it expecting an 11% increase, and then they end up with a 1% increase, The message to districts is that it doesn't cost a lot. And so I worry that when we keep decorating, actually, and this is what my school board chairs are saying right now is they don't even have a budget because they can't tell right now. I just encourage us to be cautious. Sometimes stability is just good. Agreed.

[Emilie Kornheiser (Chair)]: I think stability in tax rates is one of the most important things this committee can do. And I think for the last few years, we've been balancing between stability and tax rates, and tax bills that people can afford.

[Unidentified committee member (primary diarization for Speaker 2)]: And it's 1% last year.

[Emilie Kornheiser (Chair)]: So I think that's what we're trying to find our way through. Does anyone have any other questions about what's in front of us here? Any other lines that folks wanna go deeper on? I heard a request for sales and use.

[Unidentified committee member (primary diarization for Speaker 2)]: Nope.

[Emilie Kornheiser (Chair)]: Your request was mailed in rooms. Yes. Representative Masland.

[Rep. James Masland]: Just to reiterate the last couple of sentences, which are very telling at home, because when we tinker with aspects of this chart, we end up inadvertently sending the wrong message to people here the last Senate said, you know, as opposed to the overall picture, which is, I think, to folks back home. I just reason for that. Thank you. Makes sense?

[Emilie Kornheiser (Chair)]: Yes, and I think the field has been seeing us put up different versions of the Outlook since the internet started being available to them. We're not going to decide on a yield until they actually finish their budgets. I don't want to continue in this cyclical thing. And I think one of the good work that we did last year was that we are not stuck in this weird decision making loop in the future. But it is what it is. And I don't think we can have that keep us from having the tough conversations we need to have in here.

[Unidentified committee member (primary diarization for Speaker 2)]: Yeah. The only other thing, I don't know if it's possible, but we could go to the web report and look for it, but when we make significant program changes, it sometimes takes a while for expenditures to change, and I would really strongly encourage us to look at some of those items that we changed a couple of years ago to see what's tracking, because it's small initially, but then it can go as demonstrated, I don't know if we're tracking it, it's not visible here.

[Emilie Kornheiser (Chair)]: Are there specific things you're referring to other than waiting?

[Unidentified committee member (primary diarization for Speaker 2)]: Yeah, the way we changed adult education, as an example, potentially doing well in early childhood, those are all programs of see significant potential to grow, same with some of the childcare subsidies on them. And I just think we want to keep an eye on them, I'm not saying we'll change it, but I think we want know what's going on.

[Emilie Kornheiser (Chair)]: And I believe that the Commerce Committee is going to take testimony on adult education sometime in the next week or two. And both committees are going to have a joint hearing that might touch on dual, on early college

[Unidentified committee member (primary diarization for Speaker 2)]: this Thursday. And those are all the kids that have been pushed into the EDF to be unaware of that. So everything's on dual. Anything else on this slide for Julia?

[Rep. James Masland]: Thank you.

[Unidentified committee member (primary diarization for Speaker 2)]: You have another slide deck. You want to take us through it? Sure.

[Speaker 0]: So there's a slide deck posted on the community page under my name. I'm going

[Unidentified committee member (primary diarization for Speaker 2)]: to go ahead and pull it up.

[Speaker 0]: While I'm doing that, the context for this is your chair asked me to dive a little bit more deeply into the range of per people spending in the prior fiscal year. So that's really what this slide deck is about. So I prepared two chunks of these slides. One is a brief look at the distribution of per weighted pupil spending in FY twenty six. The second is to look at district characteristics in relation to their per weighted pupil spending. Before getting into it, I thought it would be helpful, a little reminder of what we're talking about here. There's multiple inputs that impact the calculation of per pupil spending or per weighted pupil spending. You'll recall that per pupil spending is a technical term. It's statutorily defined as the education spending divided by the long term weighted average daily membership. So what does that mean? It's the district's education spending, which is the district's total budget minus its offsetting revenues, divided by the district's long term weighted ADM, which is the total weighted peak count. So the long term weighted ADM, that's the two year average number of students plus all of their weights. And in FY 'twenty six, the total long term weighted ABM was $14.42 $5.64. The education spending, again, budget minus offsetting revenues. We were talking about this a lot. You heard from AOE about this. The sum of all education spending is referred to as the education payment. And in FY26, dollars 1,990,000,000.00 was appropriated for the education payment. So looking at these two pieces of calculating per people spending or per weighted people spending, we can see that a higher per pupil spending could be attributed to higher education spending, or it could be attributed to lower weighted pupils, or it could be attributed to a combination of both, the inverse also being true. I put together a couple of slides with the distribution of per weighted people spending in FY twenty six. First, this is really the piece that your chair asked me to think about and put something together in. You'll recall a few years ago, the yield bill required the commissioner to include in the December 1 letter the range of per pupil spending. In FY '26, this range was for districts that operate at least one school, 10,846 to 19,089. It's important to note that this is among districts that operate at least one school. Depending on the parameters that you consider for which districts you're looking at, that range will also differ.

[Unidentified committee member (primary diarization for Speaker 2)]: That doesn't jive with the spreadsheet I got, because the spreadsheet I got the low spenders who are on tuition only, and they did not grade any schools.

[Speaker 0]: What do you mean by it doesn't jive with?

[Unidentified committee member (primary diarization for Speaker 2)]: When I asked you for who the districts were by the spreadsheet that showed what the weighted spending was per district, by district, the lowest spending district, the five lowest, were all tuition districts.

[Speaker 0]: They don't have schools. So those are not being captured here. Then how come they were on

[Unidentified committee member (primary diarization for Speaker 2)]: the spreadsheet that was used for the December 1 letter?

[Speaker 0]: So taking a step back, I think we're talking about two different things. One is what is the district per pupil spending? We use all districts in calculating yield and calculating tax rates, regardless of which grades they do and do not tuition. This is a direct quote from the December 1 letter. The commissioner is required to report on the range I don't have the statutory language, and that's not what I'm saying right now, but report on the range of per pupil spending in the state of Vermont. This is the quote that was included in the December 1 letter. So if you're saying the range of the data set that we provided to you does not correspond with this and in fact goes lower Then they must have just shaved off. Then that would make sense, because this is only looking at districts that operate at least one school.

[Emilie Kornheiser (Chair)]: And whether they should have narrowed it to that extent or not, I think is a good conversation to have with tax next to I the

[Unidentified committee member (primary diarization for Speaker 2)]: still think we'd have to have a conversation around waiving of tuition because the action is not weighted. And so when you're waiting, the only thing we can do is bring down their spending per people. So it's artificially lowering. And some of those districts, they may operate in elementary, but not in middle and high school.

[Emilie Kornheiser (Chair)]: And so there's the question about whether it was appropriate for the December 1 letter to shave off the edges that way, and that's a conversation we can have tax and Ledge Council. And then there's a separate question about how to understand the spending. I think those are both good conversations to I think

[Unidentified committee member (primary diarization for Speaker 2)]: the second one is the one that matters. Sure.

[Emilie Kornheiser (Chair)]: I mean, I think how we communicate about spending matters, too. So I think they both matter. And I know not everyone makes it to the fifth page of the December 1 letter, but some people do.

[Speaker 0]: And you all are just making your way there today.

[Emilie Kornheiser (Chair)]: Nice transition.

[Speaker 0]: Moving on. So what we have here, for those of you who have been on Ways and Means, in the prior biennium, this chart will look very familiar to you. What we're seeing here is the FY26 district education spending per weighted pupil, so that per weighted pupil spending. And to wrap Holcombe's point, here we are seeing all school districts, except for gores and districts that have been suppressed because of data sensitivity. But this is where we're seeing there are some districts that are sitting below that bottom end of the range that was referenced in the December 1 letter. So what we're looking at here is each one of these blue dots is a school district, And it's corresponding with the y axis of the education spending per long term weighted ABM, or that's per weighted pupil spending. This is the same data, but in a histogram. Histogram is helpful to see the buckets and the distribution of per weighted people spending. So we see here the bins on the bottom, that's referring to the district per way to people spending. Sorry, I should have added axes labels. Don't know

[Unidentified committee member (primary diarization for Speaker 2)]: why I didn't. Leah. I know.

[Speaker 0]: That's great. And then we see on the Y axis the number of districts that fit into each one of those bins. So for instance, we see here in the middle bin that there were 23 school districts that had a per weighted people spending between 13,000 and 14,000 in FY '26. And we see that there were four school districts with a weighted spending below 10,000, and five with a weighted per per spending above 17,000.

[Unidentified committee member (primary diarization for Speaker 2)]: I just think would be helpful to look at who those are because the four smallest all have fewer than 100 kids, so they're high rated even though they have no variable cost, and to use that as a measure of anything is highly distorted.

[Unidentified committee member]: So grouping of four less than 10,000, are they the communities who have no school? Or are they not included on this chart?

[Speaker 0]: They are included on this chart. I don't have in front of me the list of I have the data set, but I don't have in front of me the list of which school districts fall into each one of these bins.

[Emilie Kornheiser (Chair)]: And generally, we don't want to take testimony that names each district, because it generally can confuse the point, but the characteristics of those districts is helpful for us to understand in future testimony.

[Unidentified committee member]: Okay. Well, before that, the dots, I thought that those on the far left were the schools who had no school, the towns that had no school.

[Unidentified committee member (primary diarization for Speaker 2)]: Districts that had no school. Yeah.

[Unidentified committee member]: Yes. What some are. And I think that's fair

[Speaker 0]: to assume because we see the range of per weighted pupil spending for districts that operate at least one school is 10,846. So we know that if school districts are falling below that and the range is then widened, it must be a school district that doesn't operate a school. So, I think that's fair.

[Kelly Murphy (Agency of Education)]: Alright,

[Unidentified committee member]: but then that group, we don't know where that group is.

[Speaker 0]: It would be fitting in down here.

[Rep. Mark Higley]: This

[Speaker 0]: data that we're looking at here on slide eight is the exact same data that's used in slide seven. It's just two different ways of looking at the same thing. So that's the distribution. And then I wanted to come back. You all were having a conversation, I think, last week about clouds and looking for patterns in clouds, and where can we look at correlation and find relationships, or lack thereof, between different variables. So the final few slides are a few scatter plots that are showing those relationships or lack of a relationship. But before looking at that, I thought it would be helpful to do a brief reminder when looking at relationships. How do we know if we're looking at a relationship? One way of doing so is looking at something called R squared. And this is a way of looking at the goodness of fit of a model. It ranges from zero to one, and an R squared of zero means that literally none of the variation can be explained by the relationship that you see on the screen or in the chart. And an R squared of one means that all of it can be explained by the relationship. So a way of thinking about an R squared of one is you have a trend line, and you can't see any of the dots because all of the dots are sitting exactly on that trend line. It's really hard to find relationships. I had entire courses in my master's that were focused on one way of looking for a relationship, one specific type of analysis to look for a relationship. And the reason it's so challenging is because we live in a noisy world, where there are so many confounding variables that it's really hard to identify. One, it's hard to identify a relationship that you know is the actual relationship and not one or two variables are proxying for something else. And two, you don't know what's causing that. It's very hard to determine what's causing that relationship. Correlation is not causation, meaning that even if we do identify a relationship think we see a relationship, it doesn't mean that one of those variables is causing the other variable. We've been having a really interesting conversation about looking at an R squared. At what point do you say, Okay, this R squared is really telling us a story here? And I think in a system as complex as Vermont's education finance, you really need to look for a high R squared to think that there is some sort of relationship at play there. And I guess this last piece, I think I spoke about this. If we don't identify a relationship between two variables, it doesn't mean that they don't impact each other or they're not connected. Perhaps There are other underlying characteristics that are then obscuring that relationship that we are trying to observe. It doesn't mean that those characteristics are impacting spending. It doesn't mean they're the only or primary or significant impact on spending. So this is really just waving a big flag of caution when looking for relationships. Our brains often want to find those relationships, but that doesn't mean that from an analytical perspective, they're there.

[Unidentified committee member (primary diarization for Speaker 2)]: Does GFO have the capacity to fit a multilevel model? Because I think part of it is what we know from a lot of the education data is if you're for other inputs, you're going to discover you can even reverse a relationship with users. I can think of a couple of just even looking for the person.

[Speaker 0]: Yeah, exactly. I think that what you're saying is precisely the point that I'm trying to get to, which is to identify a relationship, you need to control for all other confounding variables. Meaning you need to hold literally everything else constant, and only look at the relationship between two variables. Does JFL have the capacity for that? That sounds like a full time job. Did you answer the question? I think that we would need to look at priorities within JFO. I don't have the capacity to do that on top of my normal workload.

[Unidentified committee member (primary diarization for Speaker 2)]: President Masland?

[Rep. James Masland]: Yeah, I don't know if this comment will be helpful around the table or not, but one of the things that I've been concerned about in the last couple of weeks is the degree to which we get into the weights sometimes and more down on things like, as you were just talking about, Rebecca, I think, represented Holcombe. I think we confuse ourselves on what the big picture is and where we're going. That may not make sense, but it's a sorting mechanism that I try to use, and I personally lose track of the picture we're trying to solve.

[Emilie Kornheiser (Chair)]: I think one of the things that's interesting about sitting around a table altogether is that we all have different problem solving styles, and we all have different learning styles. And some of us, we're all coming at this with different knowledge bases. And so some people like to go deep fast in order to build scaffold for the rest of it. And some people like to get the big picture in order to get to the more focused

[Unidentified committee member (primary diarization for Speaker 2)]: things. Very helpful. But

[Emilie Kornheiser (Chair)]: when people it's always helpful to say, like, it's time to it would help me if we

[Rep. James Masland]: Oh, and then we go home.

[Emilie Kornheiser (Chair)]: Hand back out for seconds, or whatever the kind of metaphor is.

[Rep. James Masland]: It's our constituents in school, but my parents, so they can digest and do something about that.

[Unidentified committee member]: Yeah, absolutely.

[Unidentified committee member (primary diarization for Speaker 2)]: But I just have to say on that, when the report, the waiting study excluded tuition students, and then we, and said, don't wait them, and then we chose to wait them, I think it is worthy to at least ask how that's playing out with the health

[Emilie Kornheiser (Chair)]: Yeah, of course.

[Unidentified committee member (primary diarization for Speaker 2)]: And we haven't done that

[Emilie Kornheiser (Chair)]: yet. Yet. We are trying to get our head around, remember sort of the basics of the system again.

[Speaker 0]: Frank? So with all these caveats in mind that this is not controlling for various factors, this first I have a few scatter plots that I've put together that are looking at these two variables that we're seeing on the charts. So here we're looking at, on the x axis, the FY26 long term weighted ADM, so the weighted pupils, And the Y is FY26 per weighted pupil spending. And each one of these dots is showing a school district. So I guess I'll leave it at that, unless there's specific questions.

[Unidentified committee member (primary diarization for Speaker 2)]: Being none.

[Rep. Mark Higley]: 0.047.

[Speaker 0]: Right. So this is about as close to zero as you can get. That being said, as we spoke about, it could be that weighted long term membership, the number of weighted students and the per weighted people spending are connected in some way, what we're looking at here is simply plotting those two variables, we see no relationship between that.

[Rep. Mark Higley]: That's where as with what AOE was showing us last week, same kind of conclusions.

[Unidentified committee member (primary diarization for Speaker 2)]: Except it could also be that your big districts are all out of poverty. Unless you know how other factors interact with this, you don't really know what you're seeing here.

[Speaker 0]: I guess I would say that what you're seeing here is the total weighted pupil count does not seem to have an observable relationship when not controlling for anything with per weighted people spending. I mean, we have an R squared of zero. So that would just suggest that the weights are working. Is that what you're saying? I'm not drawing any conclusions. I'm just showing you what the data says and letting you draw your own conclusions. This next chart is similar to the prior one. Again, we see incredibly low R squared of 0.01. And what we're looking at here are the district long term average daily membership, so the non weighted pupils, compared against the per weighted pupil spending. So again, when simply plotting these two variables, not controlling for anything else, we don't see an observable relationship there.

[Unidentified committee member (primary diarization for Speaker 2)]: Let's see what relationship? An observable relationship. Representative Burkhardt. So there's one possible decision, and said everyone draws from the decision to choice. Could one possible conclusion be that in our current structure, the way we're currently set up as a state for education, scale isn't really leading to There really aren't advantages to scale in our current system in terms of I guess I don't know. One thing that I would say is,

[Speaker 0]: We don't know where this per weighted pupil spending is going and what is being offered across these different districts and charts. So you may have, and I'm not saying that they exist, I'm not postulating, but there could be an instance in which there are certain efficiencies, in which case a school district may be able to provide more at the same cost. And we wouldn't see that here in this relationship. We may have school districts, for one reason or another, that are able to get more for less money. If that's attributable to the student population, I'm not saying one way or the other, but we wouldn't be able to take that away from this chart. And I think that's one of the pieces that's really challenging when looking at these kinds of charts is it's really hard to draw conclusions or to explain them. And that's where we need to get into this more rigorous analysis. And it's still interesting. And it does show stuff as just not able to draw conclusions.

[Unidentified committee member (primary diarization for Speaker 2)]: Yes, representative. Oh, sorry. Both hands?

[Rep. James Masland]: No, no,

[Emilie Kornheiser (Chair)]: Teddy was raising his hand for you, Jim.

[Speaker 0]: Are you

[Unidentified committee member (primary diarization for Speaker 2)]: raising your

[Rep. James Masland]: hand for Teddy? I don't know, but here's a question. This is fascinating. Just the last couple of sentences and stuff. I think I heard that these are individual school districts and there may be savings that we don't see on their charts. It might indicate that HOCES or something like that show savings that we don't see because they're aggregated various districts that are not chartered. That's helpful in thinking it through. Thank you.

[Speaker 0]: I think the other interesting aspect to that end to think about is, I know we're not talking about Act 46.

[Unidentified committee member (primary diarization for Speaker 2)]: And

[Speaker 0]: It's really hard to just look at spending prior to a merger and post a merger at the aggregate level, because we don't know how If we are looking at it at the aggregate level, we don't know where that money is shifting. So there may be savings in one place or additional costs in one place. And without getting into the weeds on that, those savings and costs are going to be masked by looking at the overall aggregate figure.

[Rep. Mark Higley]: Cool. Thank you.

[Speaker 0]: This next one is poverty level. So what we're looking at here is the FY 26% of long term ADM receiving a weight for students from economically disadvantaged backgrounds. And on the Y, again, we have the same Y for each one of these charts. This is the per weighted pupil spending. I do want to note that this trend line was calculated based off of all school districts' poverty. However, there are a few dots. If you were to count all of the dots on this chart, you wouldn't count the same number because there are a few districts that have been suppressed from this chart. Small. Any student count data of a count of fewer than eleven and ten is suppressed for privacy. So that would mean that there would either be students or a poverty count or both of 11 or less. So what we're seeing here is an R squared of 0.17. Again, we're not controlling for anything. We're not looking at these two variables in isolation and only observing their relationship. So while we see a higher R squared, the interpretation of R squared is very nuanced. In which science are you looking at the r squared, and how are you observing the variables?

[Rep. Mark Higley]: You would expect if there was a real value of one, r squared one would be a line going up evenly. Or going down. Or going down.

[Speaker 0]: The directionality and steepness of the line doesn't matter. It's how far each of these points are away from the trend line. So the way that r squared is calculated is essentially looking at the distance of each one of these points to the line and then creating one aggregated metric that we can all

[Unidentified committee member]: observe.

[Speaker 0]: And I have ordered these in terms of the R squared going up.

[Unidentified committee member (primary diarization for Speaker 2)]: And I know I've said this in the past, but not to everybody, except everybody wasn't in the room before, back when Act 60 was being created, there were a few districts that were, one or two districts that were just so far off, and some of Act 60 was written to take into account a district that could be really far off and it ended up skewing the whole act. So, I think that we should reopen the possibility that if it were for most, that we can have something else happen for the one or two that are just really off and so different. And I don't know how we would want to do that, but I don't think we should contort ourselves and we can be fair to something that's really far off of where the dots are and still have a good formula for most and then figure out what to do about those dots that are too far off. I

[Emilie Kornheiser (Chair)]: think that's a really interesting idea. That's how I would like to make decisions in a normal decision making environment. That makes so much sense to me. And then I watch how skilled politicians work. And I think once you create that separate mechanism for a few districts, everyone, every year, goes looking for the special mechanism for their district. And after ten years, half the districts in the state have gotten the special mechanism. And so when I think about building a system that's resilient to our own behavior, that's one of the things I think about. And maybe I shouldn't,

[Unidentified committee member (primary diarization for Speaker 2)]: I don't know, maybe that's something

[Unidentified committee member]: I can say in public. You should figure

[Unidentified committee member (primary diarization for Speaker 2)]: this out, yeah. Know, it's tough for

[Speaker 0]: us to behave like ourselves,

[Emilie Kornheiser (Chair)]: I guess I would say.

[Unidentified committee member (primary diarization for Speaker 2)]: Sure, yes. I'm saying if you were doing it, you had to decide something. Should it be point one or should it be point four? And it works as point four for everything and you'd have to bring that point four to point two just to figure out what to do with that point one district. I think maybe we could be creative about the points on our district, and it could be, I don't know how we would write it or do it though, I just want to make that. Now I'm not talking so much about exemption or exception, as I am numbers. I get it. You can go to the next one.

[Speaker 0]: Okay, so this is the next line. Or did we just talk about this? Okay, thank you. This is the last one. So this is the highest R squared that we've seen. And we know that before even looking at the chart, because we see those dots more closely converging to the trend line than some of the others. What is the relationship we're looking at? On the x, we've got the FY25 per weighted people spending. And on the y, we have the FY26 per weighted people spending. So this chart is really just showing

[Unidentified committee member (primary diarization for Speaker 2)]: the

[Speaker 0]: prior year per pupil spending and current year per pupil spending. And that's what we're looking at here. So we see that of the four scatter plots we've looked at, this one seems to have the strongest relationship.

[Unidentified committee member (primary diarization for Speaker 2)]: That's it.

[Speaker 0]: Thanks, Julia.

[Unidentified committee member (primary diarization for Speaker 2)]: Thanks. What time is it? Five. 02:45.

[Emilie Kornheiser (Chair)]: Let's take a fifteen minute break and be back here at 02:45 to talk about the provider chat.